October 2, 2012 / 8:32 AM / 7 years ago

UK construction contracts again

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

LONDON (Reuters) - Construction activity contracted in Britain for a second straight month in September as business morale held close to its lowest since Britain entered recession in 2008, a survey of industry managers showed on Tuesday.

The Markit/CIPS construction purchasing managers’ index rose to 49.5 from 49.0 in August, a slightly smaller improvement than economists had forecast and one that leaves the index below the 50 line that separates growth from contraction.

“The principal take out from September’s PMI survey is that underlying construction weakness is likely to continue for the remainder of 2012,” said Tim Moore, senior economist at Markit.

“The current stretch of falling new orders is now the longest seen for three years ... (and) a lack of new projects meant that confidence ... remains close to its lowest since the UK economy nosedived into recession during 2008,” he added.

The weak outlook comes despite government efforts to boost the sector, with 10 billion pounds of loan guarantees to build rented housing announced last month, on top of 40 billion pounds of infrastructure guarantees and a Bank of England scheme to lower borrowing costs for households and smaller businesses.

The Markit survey showed that house building fell at its fastest pace since December 2010 last month, while commercial activity dropped by the biggest margin since February 2010.

The civil engineering sector was the main bright spot, reporting solid growth, and firms also continued to take on staff at a reasonable pace.

Most economists expect official third-quarter data later this month will show that Britain’s economy has emerged from its second recession since the financial crisis, as it rebounds from a day’s lost output in the second quarter due to an extra public holiday.

But the longer-term outlook is uncertain, with headwinds from a euro zone economy that appears to be tipping back into recession, as well as a five-year government austerity drive.

Reporting by David Milliken; Editing by Hugh Lawson

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