UK construction sector shrinks as Brexit uncertainty spreads

Building job numbers fall at fastest rate since 2012

Alys Key
Tuesday 04 June 2019 10:36
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Commercial building was worst-hit, with firms reporting the steepest fall since September 2017
Commercial building was worst-hit, with firms reporting the steepest fall since September 2017

Output in Britain’s construction sector contracted in May, as Brexit uncertainty weighed on demand while job numbers fell at their fastest rate since November 2012.

The Markit/CIPS UK Construction Purchasing Managers’ Index recorded a reading of 48.6 for May, down from 50.5 in April. Economists were expecting a figure of 50.5. A reading above 50 indicates growth; below represents contraction.

Last month’s reading is the lowest since extreme weather during last year’s Beast from the East prevented construction work from going ahead in March 2018. It is also the third time the sector has contracted in the past four months.

The weak environment affected hiring in the sector, with employment numbers last month falling at their sharpest rate for more than six years.

Tim Moore, associate director at IHS Markit, which compiles the survey, said: “The soft patch for construction work so far this year has started to impact on staff hiring, with some firms cutting back on expansion plans and others opting to delay the replacement of voluntary leavers.”

Firms reported reduced workloads, linking the soft patch to ongoing political and economic uncertainty as the Brexit process rumbles on, making clients more cautious with spending on major projects.

New orders contracted for the second month, hitting a 15-month low. Commercial building was worst-hit, with firms reporting the steepest fall since September 2017.

Civil engineering work was also depleted, with May’s fall marking the longest period of decline since the first half of 2013.

Meanwhile, housebuilding was the only area where output increased, though growth was softer than last year’s average.

Purchasing activity also declined, recording its largest fall since September 2017.

Amid the gloom in the sector, business confidence levels slumped to a seven-month low.

Howard Archer, chief economic adviser at EY Item Club, said it was concerning to see forward-looking measures such as new order numbers weaken.

“The delay of Brexit until a flexible deadline of 31 October – and current major uncertainties over what will happen then – is worrying for construction companies as it threatens to prolong uncertainty and fuel an ongoing reluctance of clients to commit to major construction projects, particularly in the commercial sector as well as infrastructure.”

PA

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