Belfast Telegraph

UK construction growth drops to eight-month low

Growth in the UK construction industry fell to an eight-month low as the driving force of the recovery suffered a blow to confidence.

The latest Markit/CIPS Purchasing Managers' Index (PMI) survey - where a reading above 50 indicates growth - fell from 53.8 in September to 51.6 in October. The market had expected a more modest fall to 53.

The figures are worrying because the construction industry has been a major factor behind the UK's economic growth this year.

But there has been no respite in the downturn in building work in Northern Ireland, with the last Royal Institution of Chartered Surveyors (RICS) construction survey finding activity at a 10-year low.

While the construction sector only accounts for 6.3% of GDP UK-wide, it was responsible for half of the 1.2% GDP growth in the second quarter and a quarter of the 0.8% GDP growth in the third quarter.

However, the Government spending cuts have undermined confidence, according to the report, and there are fears that the sector will not provide the same boost to Britain's economic recovery in the current quarter.

Markit economist and report author Sarah Ledger said: "Whilst the UK construction sector managed to record growth in October, it seems more evident that the current expansion has peaked."

Home building projects recorded a decline for the second consecutive month, to 46.2, as the housing market and lack of mortgage availability dampened confidence.

Civil engineering projects slipped back into a marginal decline, from 56.2 in September to 49.6 in October, indicating that improved performance in the first half of 2010 may be reversing as the Government cuts spending.

Only commercial construction projects saw an increase in activity, at 54.8 in October, although the rate of growth slowed from 58.8 in September. In a further blow, construction firms implemented another round of job cuts due to weak expectations of future trading. Staffing levels have now decreased for four months running.

There may be more bad news for the sector as anecdotal evidence suggests that the volume of new contracts being offered to the market was decreasing because customers were reluctant to commit to new projects.