Construction companies are cutting jobs at an increasing rate, as confidence in the sector remains low.
Employment in the UK construction sector declined for the fourth consecutive month in October, according to latest research from the Markit/CIPS Construction Purchasing Managers’ Index.
Contractors indicated that the general slowdown in the industry had led them to assess costs. Usage of sub-contractors also declined during the month.
The October CIPS data provided further evidence that the recovery of the UK construction sector peaked in the summer. The Index posted a score of 51.6 – the lowest reading in an eight-month period of expansion. A score above 50 indicates growth, with a reading below indicating decline.
Input prices faced by construction companies in the UK continued to increase during October, the CIPS research found, driven by rising raw material prices. However, the rate of inflation was the slowest in eight months.
Of the three broad UK construction sub-sectors, only commercial reported a rise in activity in October. Furthermore, the expansion in commercial-based construction slowed during the month.
Housing and civil engineering both recorded contractions in activity (albeit only marginal in the latter).
New order books at construction companies in the UK increased during October. However, the rate of growth eased for a fifth consecutive month from May’s recent high. Anecdotal evidence suggested that the volume of new tender opportunities was decreasing, as customers were reluctant to commit to new projects.
Sarah Ledger, economist at Markit, said: “Whilst the UK construction sector managed to record growth in October, it seems more evident that the current expansion has peaked.
“The month-on-month rise in new business eased once again, with constructors attributing this partly to reluctant clients that are concerned over public spending cuts and the health of the general economy. The slowdown in the sector was highlighted by another month of job cuts, while confidence remained at relatively low levels.
“Looking ahead therefore, it may be reasonable to assume that construction will have less of a positive impact on GDP compared to Q3.”