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Freeze and Budget worsen slump in building activity

THE construction industry suffered a sharp fall in activity last month as severe weather choked existing projects and a brutal Budget choked new ones.

The weak finish to 2010 was confirmed by the latest Ulster Bank Purchasing Managers' Index, which also showed a sharp fall in jobs in December.

"It was a weak end to another extremely tough year," said Ulster Bank economist Simon Barry, noting that activity had fallen at its sharpest pace since May.

New orders also fell, suggesting the construction industry's collapse, which began in 2008, will continue into its fourth year.

The weakest sector remains civil engineering, which recorded a result of 30.2 in December, well below the survey's 'break-even' mark of 50.

Industry bodies have warned that further falls in civil engineering activity are likely this year, after the Government slashed 2011's capital spending budget by €1.8bn.

Commercial activity also slumped in December, dipping from 43.4 to 41.7, while housing activity improved marginally from 44.6 to 45.5.

All three sectors remain in decline, since all their results are below the crucial 50 mark, while the overall industry-wide result dipped from 41.7 in November to 40.6 in December.

"The recent cold snap undoubtedly added to the sector's difficulties in December and so the survey results may somewhat exaggerate the degree of weakness," said Mr Barry.

"However, aside from the weather effects, it is clear that the sector continues to face ongoing difficulties."


The detail of the latest index shows a "further marked reduction in new orders", which Mr Barry attributed to both the weather and "down pressure on new business flows".

"Looking to the year ahead, survey panellists have concerns about the implications of the budgetary spending cuts," he added.

Companies have already begun cutting jobs in anticipation of that lower demand, with December featuring the "fastest job shedding since May".

However, the survey revealed a "slight improvement in sentiment" among companies amid the "expectation that the economy will stabilise in the coming year".

That sentiment is in sharp contrast to representative group the Construction Industry Federation, which recently warned that budget cutbacks could cost 25,000 jobs and "create a drag on domestic recovery". The CIF had asked the Government to maintain capital spending levels to protect employment in the industry and generate tax returns for the Exchequer.

Cutting capital spending was the "wrong choice", CIF boss Tom Parlon said after the Budget, expressing "huge concern" for construction jobs.

Irish Independent