Construction industry hit by worst slowdown in a decade

Britain's construction industry suffered its worst slowdown in more than a decade during May, the Chartered Institute of Purchasing and Supply (Cips) said yesterday, as builders were hit by the slowing economy and a collapse in the housing sector.

Cips said activity in the construction sector slowed for the third month running in May, with an index reading of 43.9 compared with 46.1 in April. Any reading below 50 signals a slowdown.

The decline between April and May was the fastest rate of contraction since Cips began its monthly surveys of the construction sector in April 1997.

Roy Ayliffe, the group's director of professional practice, said: "May data for the sector heralded a further, more marked contraction in levels of new business and, notably, the use of subcontractors fell at the fastest rate in survey history as demand for their service continued to wane."

Activity in the housing market was particularly depressed, with the index for this sub-sector of the construction market falling from 40.3 in April to 32.7 last month. A series of housebuilders have issued profits warnings and cut building plans in recent weeks.

The figures reflect fears that the economy is sliding towards recession, with Cips also warning this week that the manufacturing sector's three-year run of monthly growth had come to an end. Manufacturing has until now been the most resilient sector of the economy.

Meanwhile, Nationwide Building Society said yesterday that consumer confidence had slipped further during May, registering a new low for the second consecutive month. Fionnuala Earley, the society's chief economist, said: "Darker economic news throughout the month as fuel prices reached new highs, food prices remained elevated and uncertainty about an early cut in interest rates heightened, are likely to be major factors in this."

The Bank of England's Monetary Policy Committee begins its monthly two-day meeting today but few economists expect it to announce a cut in interest rates tomorrow, with fears of rising inflation outweighing concern about the slowing economy.