Construction activity has been hit by a slump in housebuilding

Construction activity slowed at its fastest rate for at least 11 years last month as the sector was hit by a sharp slump in housebuilding, a survey revealed..

The Chartered Institute of Purchasing and Supply (CIPS) said its Construction Purchasing Managers' Index - which measures overall industry performance - dropped 5.1 points to 38.8 in June, the biggest monthly fall since the survey began in April 1997. A figure of 50 represents growth.

The CIPS housing activity index dropped to 25.6 in June from 32.7 the previous month, also the lowest reading on record. Both other industry sub-sectors registered falls as well, with commercial activity down from 43.6 to 41.1 last month, and civil construction down to a new record low of 40.0, from 52.5 in May.

The construction sector has been among the worst affected by the recent economic slowdown, with borrowing harder to come by as a result of the credit crunch and soaring raw materials costs taking its toll.

Wednesday's CIPS survey came as Britain's biggest housebuilder Taylor Wimpey warned it was laying off 900 jobs in the UK to cope with the downturn. The firm said its house completions fell by a third during the first six months this year, and that it was not expecting any recovery "in the short-term".

CIPS director Roy Ayliffe said: "Purchasing Managers in the UK construction sector had little to celebrate in June, as activity in the industry fell at a record pace.

"Of all the sub-sectors covered in the report, housing bore the brunt of the credit crunch fallout, reflecting the steep decline in new house building.

"The labour market suffered its first contraction after nearly two years of growth amid reports of significant lay-offs and redundancies. All these factors contributed to a dampening of confidence about the future performance of the sector."

CIPS data revealed employment levels decreased in the UK construction sector after 23 consecutive months of growth. June saw the seasonally adjusted Employment Index come in at 47.8 - down from 50.2 in May.

The survey also showed firms have had to wrestle with the cost of raw materials rising at their highest ever rate. Soaring oil and steel costs saw the Input Prices Index notch up a reading of 81.5, up from 72.6 in May.