Business

UK construction sector contracts again in August

Construction has been the main drag on the UK economy
Image caption The fall in construction activity has been a significant drag on the UK economy

Activity in the construction sector, which has been a significant drag on UK growth, contracted again in August.

Construction activity in the month was down 11.6% from the same month in 2011 and down 0.9% from July's level, according to official figures from the Office for National Statistics (ONS).

The figures will be part of Q3 GDP, due to be released on 25 October.

The figures agree with Markit's PMI construction survey, which also showed the sector contracting in August.

Markit's survey suggested that new orders had slumped at the fastest rate since the height of the 2008 financial crisis.

The ONS said that new work had declined by 15.6% compared with August 2011.

Construction output had risen 2.1% in July compared with June.

"The drop in construction output in August means that construction output will likely have been essentially flat quarter-on-quarter in the third quarter," said Howard Archer, chief UK economist at IHS Global Insight.

"This would be very disappointing, as while it is evident that the sector faces ongoing serious headwinds, the hope had been that construction output could eke out some growth in the third quarter through the making-up [of] some of the activity lost in the second quarter to the very wet weather and the extra day public holiday."

A bank holiday that would normally have been in May was postponed until June, with another day added as part of the celebrations of the Diamond Jubilee.

The bank holidays flattered July's figures compared with June's.

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