UK construction industry: Contraction to continue?

The UK construction industry has shrunk for the 18th month in a row, leading many experts to ponder the future of the sector.

Although the contraction fell at its slowest pace in 18 months, the monthly survey by the Chartered Institute of Purchasing & Supply (CIPS), which measures activity in the construction sector, showed a level of 47.7 in August, indicating that the sector had shrunk again.

The report showed that UK factory output had dropped despite expanding in the previous five months, and that there had been an increase in job cuts as companies struggle to save costs.

"Employment levels contracted sharply in August as constructors continued to adjust capacity to accommodate reduced business," the CIPS stated.

Housing and commercial orders were all down but like overall figures, the rate of decline had slowed on the previous month. The fall in activity in the civil engineering sector had however worsened during the month.

There has been light at the end of the tunnel though with a dearth of civil engineering orders and possible business expansion.

David Noble, the chief executive of CIPS, said: "Though August saw a reduction in the rate of deterioration in the construction sector, it is still the sick man of the UK economy. Far from seeing signs of a return to growth, the sector remains stuck in an unprecedented 18 month period of contraction."

He added: "Civil engineering, which has so far proven less volatile than the other two sub-sectors - performed the worst in August - reflective of the instability of the industry as a whole."

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