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UK construction industry suffers worst month in a decade

UK construction industry suffers worst month in a decade

Britain’s construction industry slumped to its worst monthly performance in more than 10 years in June as building firms blamed the Brexit crisis for a lack of new work.

Housebuilders joined civil engineering firms and commercial building contractors to warn that a wait-and-see approach to commissioning new projects across the public and private sectors had hit the industry.

Most construction firms reported hanging on to their staff to be ready for a conclusion to the Brexit talks, but in the meantime the general slowdown in the economy and the possibility of leaving the EU without a deal was dampening demand.

The IHS Markit/Cips construction purchasing managers’ index (PMI) plunged to 43.1, the lowest reading since April 2009 when the country was gripped by the global financial crisis. A PMI figure below 50 shows the sector contracted.

Last month a combination of the construction, services and manufacturing sector surveys indicated that the economy was at its weakest in May since 2012. Analysts expect the downturn to continue after the sharpest drop in factory output in June for more than six years, following figures for May showing a drop in mortgage lending and the lowest level of growth in consumer borrowing in more than five years.

The fall in housebuilding was the largest reported for three years, which construction companies linked to a weaker outlook for residential sales.

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said the possibility that a Jeremy Corbyn-led Labour party might win an autumn election was dampening demand for large-scale civil engineering projects.

“All three main sub-sectors – housebuilding, commercial and civil engineering – reported sharp falls in activity. The threat of a no-deal Brexit reportedly has dampened demand for commercial projects, while the risk of a Corbyn government following a general election has hindered activity in the civil engineering sector,” he said.