Construction output has fallen at its fastest pace for seven years in June according to new figures, however civil engineering bucked the trend by remaining stable.
The latest figures from the Markit/CIPS UK Construction Purchasing Managers’ Index give an indication of how the market is responding to the Brexit vote, although 80% of the survey responses were given before the result.
The relatively positive outcome for the civil engineering sector in comparison to the wide construction industry has led to a call for decisions on big infrastructure projects to help offset the wider slowdown. The decision on south east airport capacity, due to be made this month, has already been put back until at least October. French unions are calling for a delay in the construction start for Hinkley Point C, althoug UK unions are calling for an immediate decision.
The survey says respondents linked the downturn in business activity to uncertainty ahead of the EU referendum. It found incoming new work has declined at its steepest pace since December 2012 and there was a reduction in new invitations to tender. Residential construction was particularly hard hit, however civil engineering was broadly stable.
Markit/CIPS Construction PMI senior economist and report author Tim Moore said: “Civil engineering was the only stabilising influence, which underlines the need to shore up decision making on infrastructure projects and help offset any further loss of momentum across the wider construction sector.
“The vast majority of June’s survey responses were received ahead of the EU referendum, so the worry is that the ensuing political turmoil will hit construction spending decisions for some time to come. As a result, the latest figures raise the likelihood that the Bank of England will inject additional stimulus this summer in an attempt to dampen the short-term impact of Brexit uncertainty on the real economy.”
At 46.0 in June, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) dropped below the neutral 50.0 threshold for the first time since April 2013. The latest results pointed to the weakest overall performance for seven years, but the rate of contraction was much slower than seen during the 2008/09 downturn.