British construction industry contracts in the final month of a prosperous year

Julian Harris
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AFTER a booming middle of the year, the UK’s construction industry slightly contracted in the final month of 2010, it was revealed yesterday.

Freezing weather conditions were blamed by many constructors for the decline, recorded by the purchasing managers’ index (PMI) compiled by Markit and the Chartered Institute of Purchasing and Supply.

The index fell to 49.1 in December, from November’s reading of 51.8 – which had signalled construction growth. It marked the first contraction in the construction industry since February.

Civil engineering recorded 48.6 in the index, after slight growth – 50.9 – was recorded the previous month.

Meanwhile, the sluggish housing market saw a rapid contraction in house construction, which fell by over four points to 43.1.

However, commercial activity showed signs of making up for other sub sectors, continuing its expansion with a reading of 51.7. “Companies are well placed financially to increase buildings investment,” said Simon Hayes of Barclays Capital.

And new orders also grew, and at a faster rate than in November – rising to 51.3, from 50.9.

There was a huge jump in reported input price increases from 57.3 to 65.2, as constructors had to deal with higher raw material prices. The latest rate of inflation was the fastest in seven months, the report said.