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Brexit blamed as UK construction growth hits one-year low

“Brexit-delayed decision-making” by clients one of the main reasons for a sharp downturn and the third monthly fall in a row.


New PMI data published for the UK construction sector showed a sharp downturn to 51.1 in August compared to 51.9 in July. The report by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS) said this was the weakest performance in the last year with survey respondents saying one of the key reasons for the slowdown was “a lack of new orders to replace completed projects”. They also linked this to “reduced business investment and heightened economic uncertainty”.

Reduced Government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame.

Duncan Brock, director of customer relationships at CIPS

Commenting on the data, CIPS director of customer relationships Duncan Brock said “reduced government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame”.

The figures are gathered from the latest Purchasing Managers’ Index (PMI) survey of carefully selected companies, which provides early indicators of economic conditions in the construction industry. You can read more about PMI data at markiteconomics.com.

A reading above 50 indicates activity is growing. So at 51.1, the construction sector is still growing but it’s growing slowly and also appears to be on a downward trend with the August figure the third monthly fall in a row. The Guardian reports chief UK economist at Pantheon Macroeconomics Samuel Tombs as saying the sector is “flirting with recession”. Tombs highlighted the particularly weak performance of commercial building and warned that if progress in negotiations continues to be slow, “more firms will activate Brexit contingency plans, freeing office space and sapping demand for new commercial projects”. And in the IHS Markit/CIPS report, Brock added “without those new orders waiting in the wings, the performance of the construction sector is likely to continue to be downbeat”.

Job creation also slowing down

In a further sign of challenging times ahead for the construction sector, the data also showed firms were more cautious to hire staff with job creation growing at its slowest rate since July 2016. IHS Markit associate director Tim Moore said “there were signs that UK construction firms are bracing for the soft patch to continue into this autumn, with fragile business confidence contributing to weaker trends for job creation and input buying during August”.


Image: © Caron Badkin / Shutterstock.com
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