Construction deals a blow to UK economy
THE pound weakened yesterday as the construction industry suffered its sharpest drop in output for more than a year.
“Fragile” confidence leading to a drying up of new infrastructure projects and a slowdown in housebuilding meant building activity shrank for the first time in 13 months in September.
Optimism about prospects for the next 12 months among construction companies, which generate about 6 per cent of UK economic output, has fallen to its second lowest level since April 2013 amid Brexit uncertainty.
Sterling traded about 0.4 per cent lower against both the euro and the US dollar at 1.127 and $1.325 respectively, with economists suggesting that construction contracted in the third quarter.
The IHS Markit/CIPS purchasing managers’ construction index (PMI) fell from 51.1 in August to 48.1 last month, below the key 50-point no-change mark for the first time since shortly after last year’s referendum, with “marked falls” in commercial and civil engineering activity as clients put off spending decisions on big projects.
Housebuilding growth slowed to a sixmonth low in September, as the survey showed up worries about the outlook for ultra-low mortgage rates.
Duncan Brock, of the Chartered Institute of Procurement and Supply, said the performance was “dismal”, while Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the construction sector was “entering its own recession”.
Mark Robinson, chief executive at consultants Scape Group, said: “The UK needs more homes, schools, better highways and other crucial infrastructure to meet the demand of a growing population. Chancellor Philip Hammond’s fresh injection of cash for northern transport is excellent news, but the Government must follow through in November’s Budget with significant new investment in nationwide infrastructure.
“The UK needs a large sustainable pipeline to stimulate economic growth for the years to come. Ensuring a flow of new public sector contractors is key to the upwards trajectory of UK plc.”