Construction activity falls to record low

The construction industry faced its largest recorded contraction in activity in November, according to new data from the Chartered Institute of Purchasing and Supply (CIPS).

While housing remained the worst hit sector, the survey said that civil engineering and commercial both contracted at the fastest rate since the survey began in April 1997.

The overall figure for construction activity, measured on the basis of feedback from purchasers in the industry, was down from 38.8 in October to 31.8 in November - a record low.

The index uses 50 as a base, with any figure lower than 50 representing a contraction in the industry, and any figure above representing growth.

The November figure of 31.8 contrasts strongly with a rating of 57.4 a year ago.

The body's new orders index also registered a steep fall, posting 34.9, down from 41.2 the previous month. Subcontractor availability and quality of work improved at a record pace, while rates charged fell quicker then previously recorded.

The employment index fell to 31.2 and the index measuring the price of raw materials fell to 44.7, another record low, and the first time it has contracted in a decade.

The only bright spot was a slight improvement in business confidence on the back of the Bank of England's decision to cut interest rates by 1.5% in October. The future business activity index rose to 51.

Roy Ayliffe, director of professional practice at the CIPS, said that significant falls in new orders, industry output and employment, provide yet further evidence of the deterioration in the sector.

“There was, however, some relief for builders as input prices fell for the first time in nearly a decade. Coupled with this, the Bank of England's interest rate cut provided a glimmer of hope and helped bolster sector confidence,” he said.

Gemma Wallace, economist at Markit, said: “With weak global demand exerting downward pressure on input prices and the threat of inflation gone, the Bank of England's drastic interest rate cut fostered a modest degree of optimism in the sector. Nevertheless, there is still a fair way to go before confidence regarding future activity is fully restored to the long-run trend - especially in light of the dismal conditions that constructors are currently facing.”