Business

UK construction sector activity sees sharp drop

Houses being built
Image caption The latest construction figures were weaker than expected

Activity in the UK construction sector fell at the fastest pace for two and a half years last month, according to a closely-watched survey.

The Markit/CIPS purchasing managers' index (PMI) of activity in the sector fell to 48.2 in June, from 54.4 in May. A figure below 50 suggests contraction.

It also found employment in the sector fell for the first time in four months.

Construction sector weakness was cited as a key reason why the UK fell back into recession at the start of 2012.

Figures from the Office for National Statistics showed that output in the construction industry fell by 4.8% in the first three months of the year, with the economy as a whole contracting by 0.3% in the quarter.

Reverse gear

Markit - the company behind the survey - said that some anecdotal evidence had pointed to the Diamond Jubilee bank holiday as being behind part of the decline.

However, it also said that respondents "widely commented on weaker underlying business conditions".

It added that the worst performing areas within the construction sector were civil engineering and housing activity.

"The UK construction sector moved back into reverse gear in June, with output falling at its fastest pace since the end of 2009 amid a steep decline in civil engineering," said Tim Moore, a senior economist at Markit.

"A drop in business activity was perhaps inevitable given that the month started with an additional bank holiday and ended with severe weather across large parts of the UK. However, these temporary factors should not be overplayed, as the latest figures reveal worsening underlying business conditions within the sector."

On Monday, the PMI survey for the UK manufacturing sector indicated that the pace of decline eased in June, although export orders continued to fall.

The manufacturing PMI figure rose to 48.6 from May's three-year low of 45.9.

On Thursday, many analysts expect the Bank of England to announce an expansion of its programme of quantitative easing in an attempt to boost the UK economy.

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