Construction enjoys surprise pick-up but confidence tumbles

The sector showed a five-month high as firms took on new work and increased their workforce, according to the Markit/CIPS construction survey.

The survey, in which a reading above 50 represents expansion, hit 53.9 in October, up from 50.1 in September.

Economists had expected it to flatline at around 50.

The growth was driven by a surge in new orders from businesses, with civil engineering broadly stagnant and housebuilding in decline for the fifth month in a row.

But confidence dropped to its lowest level since December 2008 – when the UK was in the depths of the recession – amid Government cutbacks and uncertainties about the strength of private sector demand.

The figures, although improved, will not significantly allay fears that the UK economy will contract in the final quarter of 2011, after woeful manufacturing figures released on Tuesday.

CIPS chief executive David Noble said the survey indicated that the sector had accelerated “at some pace after a broad stagnation in September”, but was “nothing to get excited about”.

He added: “Due to current economic conditions, it may be some time yet before we start seeing the sustained growth the sector really needs. Across the sector as a whole, confidence about future business activity plunged to its lowest in almost three years, with optimism fading as constructors come to recognise that there are more challenges yet to come.”

The construction sector continued to recruit more staff in October, although at a slower rate than before.

Inflation on goods rose markedly in October, having hit a 10-month low in September.

It was driven upwards by the rising cost of fuel and raw mater-ials.

Howard Archer, chief economist at IHS Global Insight, said the sector is “far from racing ahead and it clearly faces an extremely challenging environment”.