Construction activity stagnates as new orders fall

Aaron Morby 13 years ago

Construction companies are seeing dangerous signs of a fall-off in new orders and the cancellation of projects, according to the latest survey of construction purchasers.

Existing contracts are still helping to support output, but this has been offset by a fall in orders, tenders and cancellation of some projects.

Construction firms completing the Markit/CIPS Construction Purchasing Managers’ Index survey reported a reduction in new business received during September, the first contraction since February last year.

The Index fell to 50.1, only fractionally above the 50% no-change threshold that separates expansion from contraction. September’s reading was down from 52.6 in August

Firms surveyed said that opportunities to tender had fallen, with some companies also warning that weak client confidence had led to some projects being delayed or cancelled.

Two of the three broad construction categories monitored – housing and civil engineering – recorded lower output last month.

Residential construction was the weakest performing sector, continuing the recent trend. But office construction activity increased in September helping to hold-up construction just above the water line.

Sarah Bingham, Economist at Markit and author of the UK Construction PMI said:  “Activity growth slowed to near-stagnation, with constructors relying on work on existing contracts to support output.

“This therefore bodes ill for construction activity in the coming months.

“Civil engineering declined during September, reflective of cuts in public spending. Meanwhile, house building activity decreased at the fastest rate in 9 months.”

However, recent announcements by the government may provide a reprieve in the coming months, as plans are made for land to be released for development, with construction companies not paying until the resulting properties are sold.

She added: “While growth for Q3 as a whole was modest, it was slower than the expansion recorded in Q2, adding to worries that the overall UK recovery has lost further momentum from the lacklustre GDP growth seen in Q2.”

David Noble, chief executive Officer at the Chartered Institute of Purchasing & Supply, said:  “Things can only get better’ is the feeling amongst some UK construction companies as many pin their hopes on improved market conditions to pull the sector out of this near standstill.

“However, delayed and cancelled projects, more competitive tendering, and general uncertainty over economic conditions are putting a dampener on things, resulting in the first reduction of new orders in 19 months.

He added: “Purchasing managers reported an easing in input cost inflation which may provide some relief for the sector as some noted that the price of certain commodities have started to fall, but there is still a steep hill to climb as high raw material and fuel costs continue to have a significant impact.

“The employment figures are mixed, with some ups and downs, but the overall picture seems to be ‘wait and see’.”

Latest news

Former Crossrail boss Mark Wild to lead HS2

Wild to bear down on spiralling costs and bring rejigged scheme in on time
39 mins ago

Receivers in at £125m Manchester tower developer

Domis Construction walked away from scheme following doubts over funding
20 hours ago

McAlpine pulls out of £55m Carlisle Citadels project

University of Cumbria starts hunt for replacement contractor
4 days ago

Strabag UK suffers further big trading loss

Austrian contractor is gearing up for major presence in the UK market
3 days ago

Durham Uni picks UPP for £130m student scheme

Firm will deliver 1,000 self-catered bed spaces
3 days ago

Architects now upbeat after 10-months of work gloom

Larger practices see rising workloads in next three months
3 days ago

Motorist dies after collision with road paver

Police Scotland investigating fatal crash
4 days ago

McLaren Living appoints HG Construction for £69m scheme

Build to Rent scheme will transform former vacant car park site in Leeds city centre
4 days ago

Squibb liquidator probes £2m of “missing” plant

Machinery, cars and scrap metal have disappeared at demolition specialist
4 days ago

Galliford Try to re-enter affordable homes market

Contractor sets out new five-year plan to build margin to 4%
4 days ago

Former Sellar chief to lead civils contractor Kilnbridge

Owen Dannatt joins as new CEO as founder Dermot McDermott becomes Chairman
4 days ago

Hunt starts for nuclear fusion plant construction partner

Fusion energy plant to be built at West Burton coal power station site.
4 days ago

National Grid raises £7bn for big infrastructure upgrade

Rights issue to fund a major round of capital investment in energy infrastructure
4 days ago

Grenfell police probe to last at least until end of 2025

19 companies and 58 individuals could eventually face charges
5 days ago

Mace confirmed on £100m London office retrofit

Work underway on Helical's 100 New Bridge Street job near Ludgate Circus
5 days ago

Wylfa chosen for next big nuclear power station build

Government names Anglesey site for a large-scale gigawatt nuclear power plant.
5 days ago

Bowmer & Kirkland trading profit halves

Contractor buys HVAC specialist Adcock despite challenging market
5 days ago

Piling specialist Van Elle plans further job cuts

Piling specialist plans further cost savings in face of lower demand
5 days ago

Civils contractor A Catlow files administration notice

High voltage cable specialist lodges court notice
5 days ago

Green light for ARC Oxford lab campus

Work to start later this year on £40m Ascent building job
5 days ago

Stonehenge tunnel hit by another legal delay

Court upholds latest appeal against £1.7bn scheme by campaigners
6 days ago

Plans go in for huge Olympic Park construction hub

Bow Goods Yard could deliver 3.5m tonnes of materials a year to sites across London
6 days ago

40% affordable homes target for Labour’s new towns

Labour pledges to select new town sites by end of first year
6 days ago

Plan for £100m Liverpool Baltic station

Construction work could begin next year
6 days ago

Surgo Construction went down owing £4.5m

Biggest creditor is Bellway Homes after dispute on housing job
6 days ago

Vistry seals £157m West London housing deal

Around 575 homes to be built at Merrick Place scheme in Ealing
6 days ago

Streamlined Watkin Jones returns to profit in first half

Multi-room specialist sees secured work pipeline hit £1.4bn
6 days ago

Bellway hires ex-brickie as group construction chief

James Griffin to oversee move to the Future Homes Standard and timber frame.
6 days ago

Persimmon under fire for delays to £10m relief road

West Suffolk Council serves Breach of Condition Notices after timetable slips again
6 days ago

BAM wins £33m Kent secondary school job

Replacement Swanley academy to be built at live school site
6 days ago

Contractor services