The outlook for the British building industry has been described as “dire” by one economist after the industry suffered its worst month for 7 years during June. With new orders collapsing in the run-up to the EU referendum and property investors being put off by the decision to leave, a number of firms have been forced to mothball projects.
The Markit Cips construction purchasing managers’ index (PMI), which is used to measure performance in the market, fell to 46 during June from 51.2 in May. Economists had expected the index to fall to 50.7 this month and any reading below 50 indicates the industry is contracting. The index has fallen sharply during 2016, with many investors choosing to delay decisions until the outcome of the referendum was known.
Markit explained that deteriorating order books meant that many firms were struggling to find orders to replace completed work:
“A number of firms commented on reluctance among clients to commence new contracts in the run-up to the EU referendum, alongside ongoing uncertainty about the general economic outlook. Incoming new work has now fallen for two months running, and the latest reduction was the steepest since December 2012.”
Survey Only Intensifies Concern
Howard Archer, who is Chief Economist at IHS Global added:
“This is an absolutely dire survey that fuels serious concern over the construction sector. Furthermore the survey was 80% completed before the UK voted to leave the EU. The survey can only intensify concern as to just how much the construction sector will be hampered by the Brexit vote.”
Markit did offer the industry one silver lining – the current rate of contraction was slower than that witnessed during the financial crash of 2008/09. Like many industries in the UK, what is needed at the moment is a sense of direction and certainty for the future.