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Warning bells sound as construction slides

The British construction sector is in decline for the first time in more than six years in one of the strongest signs yet that the economy is turning sour.

And the level of new orders on builders’ books has fallen for the first time in a decade according to a damning new report on the health of the industry.

The Construction Purchasing Managers’ Index slumped to 47.2 points in March, down from 52.4 in February. A reading below 50 indicates the sector is contracting.

While activity in the residential sector fell for the fourth consecutive month, it was the first negative reading for the broader construction industry since early this decade.

The index is calculated by the Chartered Institute of Purchasing & Supply and NTC Economics based on questionnaires sent to more than 600 companies.

The New Orders Index, measuring the level of orders placed with builders, fell from 52.1 points to 48.9 – the first sub-50 reading since October 1998.

Compounding the headache for builders, prices are growing fastest level since late 2004. The index measuring input prices jumped from 73.2 in February to 74.4 last month.

Director of professional practice at the institute Roy Ayliffe said: “The residential and commercial sub-sectors suffered the most as they both contracted at the fastest recorded rates since the survey began (in 1997)”.

Companies that participated in the survey said growing economic uncertainty had led clients to postpone developments.