Industry output rises slightly in October

UK construction activity rose marginally in October but the overall outlook for the industry remains bleak, the latest Markit/CIPS construction purchasing managers’ index has found.

The index rose slightly to 50.9 in October, up from 49.5 in September, but only fractionally above the 50.0 mark, which represents no change.

The survey found a subdued trend in output levels alongside moderate reductions in new work and employment.

The latest reading is also much weaker than the average seen in the decade leading up to the global financial crisis in 2008 (56.3), “thereby highlighting an ongoing subdued trend in output across the construction sector”, according to the survey.

It found residential building activity was the weakest performing sector, with output declining for the fifth successive month.

Commercial activity also dropped in October, but at only a marginal pace.

Higher levels of construction output were confined to civil engineering in October, with the sub-sector registering moderate growth for the second month running.

Tim Moore, senior economist at Markit said: “October’s survey indicates an improved trend in UK construction output compared to the declines seen through the summer. However, the bigger picture remains bleak given ongoing falls in new orders alongside renewed job cuts across the sector over the month.

“Construction firms are seeing the most protracted period of new business losses since 2008/09, meaning an escalating shortage of work to replace completed projects.

“Reflecting this, the year-ahead business outlook was still relatively subdued during October, as survey respondents cited weak spending patterns and squeezed budgets among clients. Some construction firms also noted greater worries about competition for new work amid signs of over capacity in parts of the industry.”

David Noble, Chartered Institute of Purchasing & Supply chief executive said: “Despite marginal growth in October, the prospects for the construction sector are bleak as firms prepare for the worst.

“They are heading into a long, dark winter, by shedding jobs and laying off subcontractors in response to the longest decline in new business since the start of the financial crisis in 2008/2009.

“There is contagion right along the supply chain with rising fuel and energy costs and lengthening delivery times ensuring there is little hope of respite in the immediate future. All of this compounds the imminent threat of budget cuts in 2013.

“If there is any silver lining to the dark cloud which hangs over the industry, it is that there is at least one part, civil engineering, which remains in growth territory. But this is scant consolation given the continued decline of the housing and commercial sectors.”