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House-building slowdown

5 January 2013 9.00am.

House-building activity fell at its fastest rate for two years last month as construction firms battled persistent rain, figures revealed yesterday.

Activity in the wider construction sector fell at its fastest rate for six months, according to the latest Markit/CIPS purchasing managers’ index (PMI) survey.

The report had a reading of 48.7 during December, below the reading of more than 50 which represents growth and down from 49.3 in November.

Tim Moore, survey author and senior economist at Markit, said the “sharp and accelerated” downturn in housing activity to 43.1 was the strongest since a snow-related drop in December 2010.

He said last month rounded off a miserable year for the construction sector.

“While some firms cited the unusually wet weather as leading to longer than expected seasonal breaks at the end of 2012, weak underlying demand remains prevalent throughout the sector,” he added.

Howard Archer, chief European and UK economist at IHS Global Insight, said the sector continued to face major headwinds, including reduced public investment and spending, an extended weak economy, a struggling housing sector and problems in getting funding for large-scale 
projects.

Chancellor George Osborne announced plans to invest £5 billion in construction projects, including in new schools and roads, over the next five years, in his Autumn Statement last month.

But Mr Archer said: “The construction sector will be fervently hoping that the economy can see sustained growth in 2013 and that this stimulates building work.

“The sector will also be hoping desperately that the Government comes up with more support and initiatives to lift activity on top of the limited help provided in the Autumn Statement.”

The survey also revealed there was strong competition for new contracts as volumes of new work fell for the seventh month in a row in December.

Employment in the sector also contracted for the third month running.