Construction activity suffers sharpest ever fall

Evidence of a slump in construction activity has been strengthened by a survey showing a record fall in new work.

The Chartered Institute of Purchasing and Supply/Markit construction report for December showed activity in the UK construction sector falling at the sharpest rate recorded by the series to date.

The report said the information reflected a retrenchment in demand alongside company concerns that the continuing economic crisis shows “little sign of relenting”.

The seasonally adjusted CIPS/Markit UK Construction Purchasing Managers' Index hit a new low of 29.3, down from 31.8 in November. The index provides a single figure measure of the trends in construction sector activity.

Housing saw the most considerable decline, but activity in both the civil engineering and commercial sectors also fell at series-record rates last month.

The level of new orders placed with UK construction firms also fell at the steepest rate in the survey history in December, with companies indicating that tender enquiries had dried up in response to uncertain economic prospects.

The survey noted that fears of a prolonged economic downturn had led to clients postponing or cancelling planned project developments.

Sharp falls in new business and total activity prompted firms to reduce their overheads in December in an attempt to protect profitability, resulting in the seventh successive month of payroll cuts.

Meanwhile, the second-sharpest fall in subcontractor usage and a steep rise in availability forced subcontractors to lower their rates for the fifth month in a row, and at a survey-record pace.

Commenting on the survey, Roy Ayliffe, director of professional practice at the Chartered Institute of Purchasing and Supply, said: “The New Year spirit was decidedly muted among UK constructors amid reports of ever toughening market conditions. Further falls in global demand resulted in the most severe retrenchment in the [index's] 11-year history.

Gemma Wallace, economist at Markit, added that the “general gloom” pervading the economy would culminate in “both a pessimistic outlook for the sector over the next year and another considerable round of job-shedding”.