UK construction sector records worst performance in seven years amid Brexit uncertainty

Britain's construction sector recorded its weakest performance in seven years in June as the uncertainty in the lead-up to the European Union referendum soured sentiment in the industry, a survey released on Monday (4 July) by Markit Economics and the Chartered Institute of Procurement & Supply showed.

The Markit/CIPS UK Construction Purchasing index tumbled from 51.2 in May to 46 last month, falling well short of analysts' expectations for a 50.7 reading and dropping below the neutral 50 threshold for the first time in three years.

However, Markit said its latest survey pointed to the weakest overall performance in the construction industry for seven years. The slump was led by a steep decline in residential building and by the first reduction in commercial work since May 2013, Markit added, indicating the rate of contraction was much slower than that recorded during the 2008 financial crisis.

The uncertainty ahead of the EU vote also contributed to the sharpest drop in new business volumes since December 2012. As a result of the weakening demand, firms put hiring plans on hold, while purchasing activity fell for the first time in more than three years.

"Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum," said Tim Moore, senior economist at Markit.

"However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook."

A host of construction firms among those surveyed highlighted clients' reluctance to begin new contracts in the run-up to the EU referendum, alongside ongoing uncertainty about the general economic outlook.

Meanwhile, incoming new work fell for the second consecutive month registering its steepest decline since December 2012.

"The only glimmer of light through the brickwork is the rate of decline was not as sharp as that experienced during the last recession," said CIPS chief executive David Noble.

"But, with business confidence at a three-year low, and purchasing activity at its lowest level for six and a half years, this is likely to offer little comfort."