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Optimism returns to UK construction sector

Though the increase is modest, the sector reported contraction at a slower rate – the slowest in 16 months. All three sub-sectors – commercial, civil engineering and housing construction reported continued contraction, though housing fared the worst.

There were slight falls in the level of new orders and job losses continued to be heavy. Suppliers were able to improve on delivery times however, and faster than in June. Due to increased competition, buyers were able to secure more favourable prices.

David Noble, Chief Executive Officer at CIPS, said: "Optimism is returning to the UK construction sector on the back of a perceived improvement in economic conditions.

"Whilst the current situation still looks very bleak, an upturn looks much closer than it did just a few months ago. However, times are still tough as steep competition and difficult market conditions pushed the sector into its seventeenth month of retrenchment.

"Indeed, one area of concern is residential construction which has fallen back dramatically after showing recent signs of improvement. The market will need to improve substantially before we see the level of new builds return to pre credit crunch level. While access to credit and employment levels remain low, this is unlikely to happen soon.

"What’s more, though optimism in future sector performance continued to improve, unemployment levels are still high with over a quarter of firms admitting to axing their staff in July."

Commenting on the survey, RICS chief economist Simon Rubinsohn said: "The headline index may have climbed to its best level in 16 months but it still remains below the area consistent with a flat trend in production. More encouraging was the forward looking indicator with firms showing greater confidence about the outlook than at any point over the last two years.

"The latest survey is consistent with the suggestion in the preliminary Q2 GDP report that construction output may have fallen further over this period. The decline in output from the peak point is currently estimated at around 15%. Although the likelihood is that output won’t fall very much further from here, the recovery from this point will in all probability be quite drawn out."

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