The UK construction industry saw new orders fall at the fastest pace in over three years during August, prompting a steep decline in business optimism and warnings that things will get worse before they get better.
The latest Purchasing Managers' Index (PMI) from the Chartered Institute of Purchasing and Supply (CIPS) and analyst Markit fell from 50.9 points in July to 49 points last month, indicating that the sector has slipped back into a downturn. The score was also the second lowest reading on the index since February 2010.
The decline in output reflected lower levels of business activity across each of the industry's three broad subsectors: housing, commercial development and civil engineering.
Residential building was the worst performing category but there was also a "solid reduction" in civil engineering output. Meanwhile, commercial construction activity fell for the first time in two-and-a-half years, although the rate of decline was only marginal.
Demand for construction services remained weak across the board, with new orders dropping for the third month in a row and at the fastest pace since April 2009. Builders reported lower spending among both public and private sector clients.
The deterioration in workloads meant there was a "solid decline" in purchases from suppliers, while employment levels stagnated, continuing a trend seen throughout the summer. Some firms said that concerns over the outlook for their business had weighed on recruitment decisions.
Indeed, overall confidence among UK builders fell for the fourth time in five months during August and the degree of positive sentiment for the year ahead was the lowest since October 2011.
CIPS chief executive David Noble said the figures amounted to "dire news" for the UK's long-suffering construction industry.
"Both the decline in commercial activity and the significant drop in new orders are particularly worrying," he commented.
"The commercial sector had previously been propping up the figures and the lack of new contracts suggests things will get worse before they get better.
"Inevitably, confidence has also been hit hard and it has not been recorded as low as it is now since last October. For good reason too, as it's clear that tough times still lie ahead."
By Andy Jowett
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