UK housebuilding hits 'new low' » Housing » 24dash.com

There was more grim news from the embattled construction sector today as "exceptionally weak" housebuilding dragged activity to a new low.

The Chartered Institute of Purchasing and Supply's (CIPS) Construction Purchasing Managers' Index, which measures the industry's performance, dropped 2.1 points to 36.7 in July - the lowest since the survey begun in April 1997. A reading of above 50 represents growth.

It is the fifth month in a row that overall activity has contracted, with housing the worst-hit area, the survey said.

CIPS housing index fell at its sharpest rate from 25.6 in June to 18.7 last month - also a new survey low.

July saw around 5,000 job losses announced by some of the UK's major housebuilders, such as Taylor Wimpey, as they struggled with falling sales.

The survey also showed commercial construction activity deteriorated last month, with the reading falling to 38.2 from 41.1. The civil engineering sub-sector rallied from 40 to 46.5, although still in falling activity territory.

Last month's housebuilding job losses were reflected in CIPS' employment index, which measures whether staffing levels are rising or falling in the sector. The figure was 45.6 in July, down from 47.8 the previous month.

The construction sector has been among the worst affected by the recent economic slowdown, with borrowing harder to come by as a result of the credit crunch and soaring raw materials costs taking its toll.

Global Insight chief economist Howard Archer said: "There can therefore be little doubt that the construction sector is now firmly in recession.

"Housebuilders are being hit extremely hard as housing market activity and house prices crumble in the face of elevated affordability pressures, very tight lending conditions and low buyer interest."

There was more gloomy news as total incoming new business for UK construction companies also fell to a new low.

CIPS' New Orders Index posted a reading of 41 as firms cited a high level of unsuccessful tendering for the decline in business and low confidence.

CIPS director Roy Ayliffe said: "Housing was again the sick man of the industry, as levels of activity plunged to a record low. That said, poor performance in the commercial and civil engineering sectors couldn't provide any cause for celebration.

"July marked an end to constructors' optimism about recovery, as spirits were knocked by the persistent and rapid decline in new business and activity. More jobs were shed - and at a faster pace than in June - as pessimism about the sector's future took hold."