The sick man of Britain

Published:  02 September, 2009

LONDON: Construction is the sick man of the UK economy said David Noble, chief executive of the Chartered Institute of Purchasing & Supply.

Figures from the institute show the sector shrank for the 18th month in a row last month. The only glimmer of comfort is the rate of slow down which was less than recorded in July.

Mr Noble said: "Far from seeing signs of a return to growth, the sector remains stuck in an unprecedented 18-month period of contraction." The use of sub-contractors also declined, and at an accelerated pace since July, the institute said.

Positive news for builders' merchants is the rally in house prices that may sustain RMI work. House prices in England and Wales rose by 1.7% in July compared with June, the biggest monthly leap in value since July 2004, the Land Registry said.

Every region recorded a monthly rise in prices, with the average home valued at £155,885, the analysis found. But prices were still 11.7% lower in July than they were in the same month a year earlier and sales were also down.

Howard Archer, economist at IHS Global Insight, said the CIPS data boosted hopes that the UK economy would return to growth in the current quarter, but cautioned that the housing market and commercial property sectors still face significant problems.

"The construction sector is being helped to a limited extent by the government bringing forward some infrastructure spending as part of its efforts to boost the economy, while recent modestly, but steadily rising housing market activity - and increased optimism about the outlook - has helped house building activity rise off its lows. Even so, serious concerns remain about the outlook for the construction sector," Mr Archer said.

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