U.K. Construction Contracts the Most Since 1997, Markit Says

By Jennifer Ryan

March 3 (Bloomberg) -- U.K. construction, which accounts for 6 percent of the economy, shrank at the fastest pace in at least 12 years in February as the credit famine hampered building projects.

An index based on a survey of purchasing managers at building companies fell to 27.8, the lowest since data begin in 1997, from 34.5 the previous month, the London-based Chartered Institute of Purchasing and Supply and Markit said today. A reading below 50 indicates contraction.

The U.K. Treasury today unveiled a fund to provide finance to 13 billion-pounds ($18 billion) of government-sponsored building projects that stalled due to a lack of bank finance. Bank of England policy makers may lower the benchmark interest rate to a record low of 0.5 percent this week to spur lending.

“Abysmal February data from the U.K. construction sector marks a whole year of decline in the industry and has put paid to any hopes of improvement,” Roy Ayliffe, director at CIPS, said in an e-mailed statement. “It’s safe to say that the construction sector is some way off being out of the woods as it continues to struggle with extremely weak demand.”

Persimmon Plc, the U.K.’s second-biggest homebuilder by market value, said today it posted a loss in the year through December after writing down the value of its landbank by 652 million pounds. U.K. house prices fell an annual 10 percent last month, the most since at least 2001, Hometrack Ltd. said yesterday.

Policy makers will this week cut the benchmark interest rate by a half-point to the lowest since the central bank was founded in 1694, according to the median of 60 economists’ forecasts in a Bloomberg News survey.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net