UK construction activity slumps in January as Brexit concerns continue to rise

Ben Chu
Economics Editor
Monday 04 February 2019 10:40 GMT
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No-deal Brexit will mean 'lost jobs, lower wages and higher inflation' warns Bank of England governor Mark Carney

Construction activity slumped in January as Brexit fears intensified among firms, according to the latest survey of the sector.

The Purchasing Managers’ Index (PMI) fell to 50.6 in the month, down from 52.8 previously, and only marginally above the 50 mark that separates expansion from contraction.

It was the weakest reading since March 2018, when builders downed tools in the Beast from the East snowstorms.

“Delays to client decision-making on new projects in response to Brexit uncertainty was cited as a key source of anxiety at the start of 2019,” said Tim Moore of IHS Markit, which compiles the survey.

All three main sectors – residential, commercial and civil engineering – weakened during December and new business growth was the lowest in eight months.

“The sector suffered a sharp drop in output growth in January, and the softest rise in purchasing volumes since September 2017, as Brexit continues to hamper progress and dampen client confidence,” said Duncan Brock of the Chartered Institute of Procurement & Supply, which sponsors the PMI survey.

Only just positive

The most recent official data showed construction grew at a quarterly rate of 2.1 per cent in November 2018, as the sector caught up on delayed work from the spring, but the survey evidence suggests a major slowdown since then.

“Uncertainty about Brexit has snuffed out the recovery in the construction sector,” said Samuel Tombs of Pantheon.

“More than in other sectors, the outlook for the construction sector is quite binary, based on the Brexit path chosen by politicians. In the unlikely event of a no-deal Brexit, the sector likely will slide into another recession, amid weaker business confidence and tighter credit conditions. But provided a deal is signed off, the construction sector likely will enjoy strong growth soon.”

Construction accounts for around 6 per cent of the UK economy.

The first official estimate of growth in the final quarter of 2018 will be released next week with many analysts expecting a sharp slowdown to 0.2-0.3 per cent from 0.6 per cent growth in the third quarter.

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