Bloomberg News

U.K. Construction Shrinks for Third Month on Weak Demand, Snow

February 04, 2013

U.K. construction shrank for a third month in January as weak demand was compounded by a cold snap that brought snow across the country and created a drag on building projects, Markit Economics said.

An index of activity held at 48.7 from December, Markit and the Chartered Institute of Purchasing and Supply in London said in a statement today. That’s below the 49.2 reading that was the median estimate of 11 economists in a Bloomberg News survey. A reading below 50 indicates contraction.

The U.K. is at risk of a triple-dip recession after the economy shrank in the fourth quarter. Markit said while there were reports that snowfall had contributed to the construction weakness in January, the majority of respondents cited weak “underlying client demand and a lack of new projects.’

The survey results ‘‘are yet another indicator of the severe underlying fragility across the U.K. construction sector,’’ said Tim Moore, a senior economist at Markit. ‘‘Construction firms reported improved optimism about the business outlook, although much of this appeared to rest on hopes that the chorus of calls for greater public-sector investment spending starts to come to fruition.’’

Housing volumes dropped at the slowest pace for three months, and civil engineering projects declined for the first time since August, according to the report. Commercial activity was unchanged.

New business fell for an eighth month, the longest period of decline since 2008-2009, according to the report. Still, respondents’ confidence improved, and employment rose for the first time in four months.

London-based Barratt Developments Plc (BDEV), the U.K.’s largest homebuilder by volume, on Jan. 16 predicted a ‘‘significant” increase in profitability this year as prices rise and the BOE’s Funding for Lending Scheme helps the mortgage market.

A Markit report on Feb. 1 showed that U.K. manufacturing expanded in January as domestic orders rose. The research group will probably say in a report tomorrow that services shrank at a slower pace in January, according to the median estimate in a survey of economists.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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