UK construction slumps to lowest in 2017 as real estate projects are delayed in Brexit run-up

Brexit-delayed decision-making among clients were largely to blame, according to analysts

Ben Chu
Economics Editor
Monday 04 September 2017 10:45
Commercial work contracted in August
Commercial work contracted in August

Activity among Britain’s builders slumped to its lowest in a year in August as firms delayed projects in the run-up to Brexit according to the latest survey snapshot of the sector.

The Purchasing Managers’ Index came in at 51.1, down from 51.9 in July and lower than City analysts’ expectations of 52.

Any figure above 50 signals expansion, but the reading was the lowest since August 2016, when it plunged into negative territory shortly after the Brexit referendum.

Duncan Brock, of the Chartered Institute of Procurement and Supply, said: “Reduced government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame”.

“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,” said Tim Moore, associate director of IHS Markit, which compiles the survey.

Lowest in a year

Civil engineering stagnated and commercial work contracted at the fastest rate since July 2016.

Housebuilding, however, picked up.

The construction report follows a surprisingly robust manufacturing PMI reading for August, released last week, which showed the strongest activity in four months.

The Office for National Statistics estimates that construction output fell by 1.3 per cent in the three months to June, following growth of 1.1 per cent in the first quarter.

“August’s PMI suggests that the construction sector is flirting with another recession,” said Samuel Tombs of Pantheon.

“If, as we expect, Brexit negotiations continue to progress slowly, more firms will activate Brexit contingency plans, freeing up office space and sapping demand for new commercial projects.”

Overall GDP growth is estimated by the ONS at 0.3 per cent in the second quarter, up slightly from 0.2 per cent in the first quarter, but well down on the 0.7 per cent rate at the end of 2016.

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