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Business & Economy

Construction industry suffers ten-year low as uncertainty hits sector

The UK construction industry endured its toughest month in more than a decade in June as the Brexit impasse weighed heavily on the sector.

Housebuilding suffered its largest fall for three years last month, as weaker demand and concerns over residential sales took their toll.

Commercial work also fell, for a sixth consecutive month, with the rate of contraction in civil engineering at its fastest since October 2009.

The findings were revealed today (Tuesday, July 2) in the latest IHS Markit/CIPS UK Construction PMI® report.

According to the study, domestic political uncertainty, delays to new projects and longer wait times for infrastructure contract awards had all acted as a brake on business activity.

The impact was emphasised in the accompanying IHS Markit/CIPS UK Construction Total Activity Index, which rates confidence in a sector.

The index posted a reading of 43.1 for June, which was down sharply on May’s 48.6 and well below the 50.0 number used to separate growth from contraction.

The report added total new work received by UK construction companies decreased for the third consecutive month in June, with lower volumes of new business primarily linked to a lack of tender opportunities as political uncertainty encouraged a wait-and-see approach to spending decisions.

It did, however, also reveal demand for construction staff stayed relatively resilient in June, with only a marginal fall in workforce numbers. Where a decline in employment was reported, this was often linked to the non-replacement of voluntary leavers.

Tim Moore, associate director at IHS Markit, which compiles the survey, said the situation was a worrying one.

He said: “While the scale of the downturn is in no way comparable that seen during the global financial crisis, the abrupt loss of momentum in 2019 has been the worst experienced across the sector for a decade.

“Greater risk aversion has now spread to the residential building sub-sector, as concerns about the near-term demand outlook contributed to a reduction in housing activity for the first time in 17 months.

“Construction companies reported a continued brake on commercial work from clients opting to postpone spending, with decisions on new projects often pending greater clarity about the path to Brexit.

“A continued lack of new work to replace completed projects illustrates the degree of urgency required from policymakers to help restore confidence and support the long-term health of the construction supply chain.”