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Construction slows as Brexit fog thickens

As uncertainty weighs heavily on confidence, is the UK construction industry beginning to crumble under the strain?
Construction slows as Brexit fog thickens

The most recent figures for the IHS Markit/CIPS purchasing managers’ index (PMI) for construction caused much stir when they were released earlier this month. Rebuffing expectations of an improvement from July to 45.9, a further loss of momentum saw the index fall to 45.0 in August (50 represents the no-change threshold). Leading the descent was commercial construction, with client spending showing particular sensitivity to the uncertain trading environment and keeping a lid on private activity. With Duncan Brock, group director at the Chartered Institute of Procurement and Supply (CIPS), signalling that September’s data might make for further grim reading, it doesn’t bode well for the prospects of UK construction as a whole. Still feeling the aftermath of Carillion’s collapse more than 18 months later, the industry has managed to stumble onwards. But the thickening Brexit fog is threatening to grind things to a halt.

Slowdown masks a mixed performance

The overall slowdown picture masks a mixed performance across the different types of construction. Quarterly numbers from the Office for National Statistics (ONS) indicate that construction output fell by 1.3 per cent in the three months to June, reversing the 1.4 per cent increase seen in the first quarter of the year. This was largely driven by lower repair and maintenance activity in private housing, which saw the largest quarter-on-quarter decline since late 2009. The volume of activity was still higher than a year ago, driven by a resilient housebuilding sector. But building activity in the public housing sector far outpaced more sedate growth in private housing. Aside from residential, the rest of private construction remains relatively weak, especially in sectors that typically require high upfront initial investments – commercial and industrial output in the second quarter were down 5 per cent and 6 per cent, respectively, compared with the same period in 2018.

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