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Construction firms suffer longest drop in lending since 2011

uk construction

Lending by British banks to UK construction companies has fallen at the most consistent rate since 2011, as post-Brexit uncertainty hits the industry.

This year, in each of the six months to August, outstanding loans to construction and civil engineering firms has declined. The total stock of loans fell by £1.5bn over the period, with declines in housebuilding, commercial construction and civil engineering.

Brexit uncertainty has been blamed for having an adverse impact on a UK construction industry.

Last week, shares in housebuilder Telford Homes tumbled by almost 14% after the housebuilder warned of “negative commentary around the outcome of Brexit” had led to a downturn in the market for expensive London homes.

Autumn forecasts from the Construction Products Association (CPA) anticipate growth for the UK construction sector will remain flat in 2018, rising by only 0.6% in 2019, a substantial downward revision from its previous estimate of a 2.3% increase.

CPA economics director Noble Francis said: “Overall, we are still expecting construction output to increase next year but this growth is highly dependent on housebuilding outside London and also major infrastructure projects offsetting falls in activity in other sectors.

“The forecasts assume that the UK and EU will agree a deal on Brexit towards the end of the year but the continued uncertainty over a ‘no deal Brexit has already had a big impact on construction new orders in construction sectors dependent on high upfront, often international, investment for a long-term rate of return. These include the construction of prime residential in London, industrial factories and commercial offices towers.

“Even if the UK Government eventually agrees a deal with the EU on Brexit, construction output in all these sectors is expected to fall sharply during 2019 due to falls in new orders, which have already occurred in the past 18 months, feeding through to activity on the ground.” 

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