UK construction activity crumbles as optimism evaporates - PMI

LONDON Tue Dec 4, 2012 9:52am GMT

A worker lays bricks for a residential home at a building site in north London September 6, 2012. REUTERS/Neil Hall

A worker lays bricks for a residential home at a building site in north London September 6, 2012.

Credit: Reuters/Neil Hall

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LONDON (Reuters) - British construction activity shrank last month and confidence about the next 12 months fell to its lowest in almost four years, a survey showed on Tuesday, in a blow to the government the day before a budget statement.

The Markit/CIPS Construction Purchasing Managers' Index (PMI) fell to 49.3 last month from 50.9 in October.

It was the lowest headline figure since August and below the 50 mark that separates growth from contraction for the third time in four months. It was also below even the weakest forecast in a Reuters poll and well short of the median 50.5 prediction.

"November's PMI survey suggests that construction output has yet to hit rock bottom," said Tim Moore, senior economist at Markit. "A protracted decline in workloads, the double-dip UK recession and shrinking investment spending has made 2012 a year to forget for the construction sector."

Official data suggests construction output is more than 10 percent lower than a year ago.

The deteriorating conditions during November led to a marked drop in confidence, Markit said, adding that positive sentiment was at its weakest since the near-record low seen in December 2008 when Britain was deep in recession.

Finance minister George Osborne is due to deliver a half-yearly budget statement to parliament on Wednesday. He said on Sunday that closing the budget gap was taking longer than planned, but insisted he would stick with the deficit-reduction programme.

Having suffered two recessions in four years Britain bounced back to growth last quarter after receiving a massive boost from extra working days and London's hosting of the Olympic Games, but it is seen expanding at a far more tepid 0.1 percent in the current period, with little pick up seen in the year ahead.

That view was supported by the Markit survey which showed new orders seeing their steepest decline in just over 3-1/2 years last month, pushing firms to shed jobs at the fastest pace since December 2010 as they fear a prolonged period of depressed demand.

Data released on Monday showed manufacturing activity shrank less than expected in November, though the sector remained fragile, while figures due on Wednesday are expected to show that growth in Britain's dominant services sector picked up pace.

(Reporting by Jonathan Cable; Editing by Hugh Lawson)

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