Decline in UK construction activity 'fastest for 11 years'

Published on Wednesday 2 July 2008 21:58

CONSTRUCTION activity in the UK fell at its fastest rate for at least 11 years last month in a further sign of worsening conditions in the housing industry.

The Chartered Institute of Purchasing and Supply (Cips) yesterday said its construction purchasing managers' index, which measures overall industry performance, dropped 5.1 points to 38.8 in June, the biggest monthly fall and the lowest reading since the survey began in April 1997. Any figure below 50 denotes contraction.

Meanwhile, the Cips housing activity index dropped to 25.6 in June from 32.7 the previous month, also the lowest reading on record.

The construction sector has been among the worst affected by the recent economic slowdown, with borrowing harder to come by as a result of the credit crunch and soaring raw materials costs taking their toll.

Howard Archer, chief UK economist at Global Insight, said: "Another day, another piece of dismal news relating to the UK economy. The construction sector looks to be in for an extended, very difficult time."

Cips director Roy Ayliffe said: "Of all the sub-sectors covered in the report, housing bore the brunt of the credit crunch fallout, reflecting the steep decline in new house building.

"The labour market suffered its first contraction after nearly two years of growth amid reports of significant lay-offs and redundancies. All these factors contributed to a dampening of confidence."

The report revealed that employment levels decreased in the UK construction sector after 23 consecutive months of growth. June's seasonally adjusted employment index came in at 47.8 – down from 50.2 in May.