Employment falls at fastest documented rate as building activity plummets

The UK construction economy remained firmly mired in recessionary territory in March, leading to the fastest rate of job shedding in recorded history.

The CIPS/Markit UK Construction Purchasing Managers’ Index (PMI) recorded steep falls in building activity across all monitored construction sub-sectors, with the global credit and economic crises remaining prominent factors. On the prices front, average input costs decreased at a record rate.

The headline seasonally adjusted PMI rose to 30.9 in March from February’s series low of 27.8. Nevertheless, the index remained at a level consistent with a rapid decline in overall business activity.

Sector data showed that the housing industry suffered the most marked contraction in output. Although activity fell rapidly across the housing and commercial sub-sectors, the rates of retrenchment were noticeably slower than during February.

UK constructors reported a substantial decrease in new business placed with them since February. Respondents noted sharp reductions in client budgets, strong competition to secure new contracts, fewer customer enquiries and opportunities to tender, as well as a lower success rate on submitted bids.

Lower workloads led to a sharp decrease in employment and subcontractor usage in March. Workforces were frequently rationalised via natural wastage and redundancies, although a number of firms preferred to cut personnel hours or reduce the working week.

Subcontractor availability rose faster in March than during any other period in the survey history. With the availability of subcontractors outstripping demand for their services, their rates fell steeply while the quality of their work rose markedly.

Roy Ayliffe, Director at the Chartered Institute of Purchasing & Supply, said: “Unremitting global forces continued to batter the UK construction sector in March. Purchasing managers reported further falls in overall construction activity with housing, once again, fairing the worst. Inevitably, extremely weak demand led to a significant loss of construction jobs. Firms not only reduced contractors’ days but also cut headcount at an unprecedented pace.

“The pain experienced through the continued decline in construction activity was at least partly alleviated by a dramatic reduction in input prices, with purchasing managers reporting the most marked decrease in their purchasing costs in the survey’s twelve year history.”