Despite welcome news that the UK construction sector is contracting at a slower pace, the industry is still struggling.

 

August saw a reduction in the pace of deterioration. While reduced activity was again largely attributed to dampened demand for new orders, there are a number of issues challenging the sector.   

 

Most surprising was the civil engineering subsector, which had so far proven less volatile than the other two subsectors but actually performed the worst in August. Not only is this reflective of the instability of the industry as a whole but it also raises questions over the long-term impact of the government鈥檚 economic stimulus package. 

 

Meanwhile, news that housing activity improved was well received. Though overall activity within the residential construction subsector slowed for the 21st month in a row, the rate of contraction was modest and an improvement from the lows seen in December last year. Housing activity actually registered the worst rate of contraction (compared with other subsectors) the previous month, in July.

Meanwhile, on site level, we鈥檙e seeing an easing in the rate at which firms shed staff. Nonetheless, an overwhelming 29% of survey respondents still reported that they culled jobs in August, in line with dampened demand. Though indicative of an improvement, this bleak figure serves to highlight how severe things really have been for the construction industry.

Moreover, with demand for new orders falling only marginally month-on-month, this suggests we will see a slow recovery unfold for the sector. Though times are still very tough for the UK construction sector, it has made leaps and bounds from the lows seen at the end of last year. The question now will be whether the wounds inflicted on the sector over the past year and a half will ever disappear.

David Noble is chief executive officer of the Chartered Institute of Purchasing & Supply

 

 

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