02/12/2011 07:16 GMT | Updated 01/02/2012 05:12 GMT

UK Economy: Construction Sector Slows As Recession Fears Bite

Construction sector growth slowed last month as economists warned that the prospect of a contraction in the overall economy was still firmly on the cards.

A closely-watched Markit/CIPS purchasing managers' index survey, in which a reading above 50 represents expansion, fell to 52.3 from the five-month high of 53.9 in October.

The modest growth was driven by a rise in new business received in November, the survey revealed, as construction firms recorded an increase in new contract wins, but further progress was held back by a slowdown in commercial-based activity.

Elsewhere, housebuilding ended five months of decline and grew in the month, while civil engineering output was broadly unchanged.

Howard Archer, chief European and UK economist at IHS Global Insight, said: "Evidence of modest growing construction activity in November does not hugely dilute fears that the economy could contract in the fourth quarter."

The slowdown in growth in the construction sector, which constitutes 7.6% of GDP, is the latest evidence of a wider downturn and will concern Chancellor George Osborne, who is relying on an export-led recovery in the private sector to keep the economy afloat.

The independent tax and spending watchdog, the Office for Budget Responsibility, earlier this week slashed its growth forecast for the UK for the next five years, while the Bank of England has also forecast a heightened risk of a double dip recession.

However, there was some cheer in the construction PMI survey with the rate of new order growth accelerating to its fastest since May and an increase in employment in the sector.

Blerina Uruci, economist at Barclays Capital, said the improvement in housebuilding was the greatest surprise in the survey.

But she added: "Nevertheless, we do not expect this improvement to be sustained and expect the deteriorating economic outlook, rising unemployment and subdued consumer confidence to weigh on the housing market and residential construction."