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UK construction output sees sharp drop in June 2012

Businesses in the construction sector saw a pronounced decline in business performance during June 2012, according to a new industry report.

Data from the latest Construction Purchasing Managers' Index from Markit and the Chartered Institute of Purchasing & Supply (CIPS) has revealed that output and new order levels both fell during the last month, while rates of employment dropped for the first time in four months.

Meanwhile, the index's headline figure fell from 54.4 in May to 48.2 in June, representing the fastest rate of contraction in two-and-a-half years.

Part of the decline was attributed by anecdotal evidence to the extended bank holiday at the beginning of the month, but wider business trends were also blamed, with civil engineering and housing activity demonstrating the weakest performance among broad areas of the construction sector.

Moreover, construction firms' assessment of future output dropped to an eight-month low in June, contrasting with other recent periods of disruption - such as following the 2011 royal wedding - when companies' future expectations were boosted due to the anticipation of a catch-up effect.

David Noble, chief executive officer at CIPS, said: "The renewed declines in construction output and employment are a reflection of the weakening trend in new orders seen in recent months."

He added: "The contraction was accompanied by a similar fall in cost inflation, but this is scant consolation for businesses as the global economy continues to cast a shadow over the industry."

The government is currently attempting to combat these negative trends through schemes such as its Get Britain Building programme, which has allocated £570 million to unlock locally-backed stalled sites with planning permission to restart construction activity and deliver more than 15,000 new homes.

Last month, it was announced that the initiative is being extended to aid smaller developments, with the minimum site size being reduced from 25 to 15 homes. 

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