星空传媒

Further evidence of a slowdown in the growth of UK construction has emerged, with the growth rate in May at the lowest level for more than three-and-a-half years.

Chartered Institute of Purchasing and Supply figures revealed a decline in the performance of the construction economy in May, and a further two reports in the past two weeks also point to a slowdown. To blame are static housing activity and falls in civil engineering and commercial property activity.

Experts say the industry is now critically dependent on government spending.

Alan Wil茅n, economics director at the Construction Products Association, said of the state of the industry: 鈥淲e see it avoiding recession, but the downside is that risk has increased. With the private sector slowing down, a lot will depend on government spending keeping up its momentum. Industrial and commercial sector spending is weaker, so the public sector must counterbalance this.鈥�

He said product sales showed that fewer new projects were being started, but existing jobs were going ahead. 鈥淲e have seen a decline in sales of heavy products, as opposed to lighter products used later in the job, such as heating systems.鈥�

The latest report from the Chartered Institute of Purchasing and Supply revealed that the Purchasing Managers鈥� Index, which measures the performance of the construction economy, registered 52.6 last month, down from 54.8 in April.

The CIPS said in its June report on construction that housing activity stabilised in May, having declined in the two previous months, with the index rising to 49.9 from April鈥檚 48.9.

The Commercial Activity Index dropped from 58.2 in April to 56.3 in May, its lowest level in three months. However, the CIPS said that the sector still maintained a strong overall rate of expansion.

Milan Khatri, head of economics at the RICS, said of the figures: 鈥淎 slowdown in a single month is not a big concern, but if private and public sector spending slowed down over the longer term, it could be a problem.鈥�

He said the construction industry would grow at a rate of 2-3% in the next two years. This compares with a growth rate of 3.5% for 2004 and 5% in 2003.

Khatri said: 鈥淪lower growth is mainly due to the housing sector. The commercial property market is doing well, though confidence seems to have come off slowly.鈥� He said the key driver for housing market was interest rates, which had been rising until recently.

Khatri added that 鈥渢o an extent it is positive to see some slowing down鈥� as exponential industry growth would likely result in higher material costs and wages.

DTI figures for the first quarter of 2005 show a 1% rise in construction output compared with 2004 (see box). New work rose but repair and maintenance fell in all sectors and output was unchanged compared with the previous quarter in volume terms.

The Builders Merchants Federation said sales were down 1.8% for the three months from February to April 2005 compared with the same period in 2004.