Civils work falls off a cliff but contractors still optimistic

Grant Prior 10 years ago

Construction buyers reported a slow down in falling output rates in March but workloads still dropped for the fifth month in a row.

The latest Markit/CIPS UK Construction Purchasing Managers’ Index  for March rose to 47.2 from a 40-month low of 46.8 in February.

Any number below 50 represents a contraction in the market.

Civil engineering was the worst performing sector with the steepest drop in output seen since October 2009.

Residential construction was the star performer with output rising as its highest marginal rate since May 2012.

And hopes for the future rose with construction companies forecasting a rise in output over the coming year as the degree of positive sentiment picked up in March to its highest for 11 months.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “The construction sector seems to have a spring in its step as confidence hit its highest level in a year despite the challenging state of the weather, performance and output in March.

“Whether this is a reaction to the Government’s efforts to rejuvenate construction or simply an acknowledgement that things could not have been much worse than in February, we will have to wait and see.

“While the Government’s focus on housing appears to have had a positive effect as it out performed other sectors, civil engineering is a different story; here the lack of public spending has resulted in the fastest rate of contraction since October 2009.

“At the same time, the commercial sector is doing little to pick up the slack and experienced its second weakest reading in 39 months.

“The latest figures complete the picture of a fairly dismal first quarter, which has admittedly been affected by unusually bad weather, with output and employment down on the last quarter of 2012.

“New orders on the other hand are less hard to come by in comparison, which offers some justification for the boost in confidence.”

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI, said: “Shrinking investment spending and intermittent output disruptions amid unusually bad weather kept the UK Construction PMI entrenched in contraction territory at the end of the first quarter.

“The negative print for construction output mirrors that seen for manufacturing, and now leaves the service sector as the last great hope for avoiding another slide in UK GDP.

“Concerns that the UK economy is teetering on the brink of a triple-dip have undoubtedly weighed on client spending this year, but at least some pockets of optimism for the construction sector can be drawn from the latest survey.

“Signs of rising housing activity were the main positive development, while March also saw the slowest drop in construction new orders for five months.

“Construction companies are upbeat overall about their own prospects for output growth over the year ahead, particularly in respect of the residential building sector.

“However, a renewed drop in employment numbers during March highlights that a lack of new work to replace completed projects is the dominant concern within the UK construction sector.”



The index, which measures overall output in the sector, fell from 48.7 in January to 46.8 last month, the fastest pace of contraction since October 2009

Some of the sharp falls were offset by an increase in housing activity in February, with the marginal expansion in residential building the first improvement since May last year.

Construction firms also highlighted an ongoing deterioration in their new order inflows during the latest survey period.

Lower levels of new work have been recorded in each month since last June, reflecting cuts to client budgets and intense
competition for new work.

Nonetheless, employment numbers rose fractionally in February, contrasting with the downward trend seen during
the final three months of 2012.

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