UK construction outlook at its worst in almost seven years as output and orders slide

Uncertainty about Brexit cited as brake on activity, PMI survey shows

Olesya Dmitracova
Economics and Business Editor
Friday 02 August 2019 17:38 BST
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Confidence among British construction firms plummeted to a seven-year low in July and output fell for the third consecutive month, adding to evidence of an economy in slow gear.

The latest snapshot measure of activity in the sector, based on a survey and known as the Purchasing Managers’ Index (PMI), came in at 45.3 – substantially below the 50 level that indicates no change from the previous month.

That is the second-lowest level since April 2009, when the economy was still in the midst of a recession triggered by the financial crisis. The worst reading since then was in June, an only slightly lower 43.1.

“July data revealed declines in house building, commercial work and civil engineering, with all three areas suffering to some degree from domestic political uncertainty and delayed decision-making,” said Tim Moore at IHS Markit, which compiles the survey.

“If the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain, and spillovers to other parts of the UK economy will quickly become apparent.”

The measure of the sector’s optimism about the year ahead dropped to its lowest level since November 2012 as firms worried about Brexit, the prospect of a general election and delays to infrastructure work.

In the nearer term, the outlook was also bleak as the number of new orders fell sharply, with firms blaming mainly a sluggish economy and political uncertainty.

Howard Archer, chief economic adviser to the EY ITEM Club, pointed out this was the first time since 2016 that new orders had fallen for four successive months.

“The weak July construction survey increases the concern that the UK economy has started the third quarter poorly, after GDP likely stagnated in the second quarter and could have contracted marginally,” he said.

The PMI measure of the larger manufacturing sector, released on Thursday, was also weak, coming in at 48 – the same as in June and the lowest level in six and a half years.

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