CIPS reports ’modest rises’ in order books, though fears of cuts slow pace

UK construction activity has continued to increase for the fourth successive month though confidence is still low due to forthcoming cuts.

New figures from Chartered Institute of Purchasing and Supply (CIPS) revealed that UK construction activity has continued to increase during June, but at a slightly slower pace than May. CIPS also warned that growth has failed to have any positive impact on employment due to the forthcoming spending cuts.

Sarah Ledger, economist at Markit and author of the figures said: “Perhaps the most significant story arising from the data this month was the large knock to confidence. Whilst sentiment overall remained positive, a number of construction companies were more bearish over future activity, with some concern expressed over the implications of public spending cuts and the VAT rise scheduled for 2011.”

David Noble, chief executive officer at CIPS, said: “Most tellingly, modest rises in order books did little to boost employment levels and confidence over future activity dropped. Meanwhile, curbing inflation continues to be a big issue facing firms and from our experience they are likely to be nervous about offsetting their higher costs by passing them on to clients.

“A stark reminder of just how hard this sector has been hit is the handful of cranes currently dotting the skyline and the half-finished construction projects. Recovery in the second half of the year is likely to remain fragile and we are still a long way off seeing the industry operate the way it did prerecession.”