Construction sector nears stagnation

Growth in construction activity dropped to near stagnation in January, according to the latest data from the Chartered Institute of Purchasing and Supply.

The CIPS/Markit construction index fell to 51.4, just over the 50 level which indicates zero growth. This is down from the 53.2 recorded in December, and is the lowest growth recorded for four months. Both housing and civil engineering reported declines in workload, with just commercial activity on the rise.

In addition the survey found that employment in the industry had stagnated.

Nevertheless, the CIPS survey found that confidence had risen, and new orders were also up, albeit rising at a slower rate than in December. It said confidence that activity will increase over the coming 12 months was at its highest level since May last year.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “It’s clear that many businesses have replenished their levels of optimism and have high expectations for improving economic conditions and new contracts. This confidence bodes well for the year ahead, although this visibility over potential new business will need to convert quickly into tangible work if employment levels are to improve.”

Andrew Duncan, director of property at consultant Turner & Townsend, said that increasingly competitive bidding explained why a rise in opportunities was not being converted into an increase in employment.

He said: “January is traditionally is an upbeat month for the construction sector. With the stock market beginning the year in bullish mood, hopes had been high for January. Seen in this light, such a modest rise in construction output looks more than a little disappointing.

“Certainly there are more bidding opportunities about, even if there is intense competition on price. That’s why the encouraging levels of confidence are still not being converted into anything more than meagre levels of new business.”