Construction industry woes lead to job losses

New work figures drop for fifth consecutive month forcing firms to lay off workers despite overall rise in activity

Britain’s construction industry had another difficult month in October, as new work dropped for the fifth month running, forcing firms to lay off workers at the fastest rate since August 2011.

Overall, construction activity improved slightly last month. The construction PMI from Markit/CIPS rose to 50.9 in October from 49.5 in September, indicating expansion rather than contraction, but the reading was much weaker than the average seen in the decade leading up to the global financial crisis in 2008 (56.3).

The improvement was due to higher levels of output in civil engineering, while housebuilding remained weak, with output declining for the fifth month in a row. Commercial activity also dropped in October.

“The construction sector continues to be hampered by major headwinds, notably including public spending cuts, an extended weak economy, a struggling housing sector, and problems in getting funding for large-scale projects,” said Howard Archer, chief UK and European economist at IHS Global Insight. “In particular, the government’s spending cuts are limiting overall expenditure on public buildings, schools and hospitals.”

Squeezed budgets and clients’ worries about the economic outlook have resulted in the longest period of falling new order volumes since the height of the crisis in 2008/09, according to the PMI survey. A lack of new work to replace completed projects meant companies returned to job shedding and cut back on the use of subcontractors, for a third month.

Adding to construction firms’ woes, their costs rose at the fastest rate in nearly a year due to higher fuel and energy prices, ramping up the pressure on margins.

When Britain emerged from double-dip recession recently, growing by 1% in the third quarter, construction was one sector that remained in the doldrums, shrinking by 2.5%.

In an independent report commissioned by Wickes, construction industry leaders are calling for young people to be trained in skills such as plastering and bricklaying from the age of 15, as in eastern Europe. They also call for VAT to be cut to 5% for the trade to ensure tradesmen are not out-priced by “cowboy builders” offering cash-in-hand quotations to homeowners on a budget.

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