Monday, 11 July 2016

Is Brexit deconstructing the industry?

The EU is falling apart but will
the Construction Industry follow?
The construction industry has stopped growing, fuelled by the uncertainty and fears in the lead up to the EU 'remain or leave' vote.

New figures - according to the latest survey released by Markit and the Chartered Institute of Procurement and Supply (CIPS) - show that construction output in June fell at its fastest pace since the doom and gloom during the height of the financial crisis way back in 2009. 

The Purchasing Managers Index (PMI) shows a drop in new business from 51.2 in May to 46.0 in June (anything below 50 indicates a contraction). Slower demand has lead to a drop in purchasing activity for the first time in just over three years.

The weakest performing sector was residential construction, despite record house prices and a lack of supply. Commercial building work also suffered a sharp loss of momentum as new projects did not start to replace those that were coming to completion.

Civil engineering was the only sector not to record a fall in output.

Many respondents to the survey of construction industry managers pinpointed the uncertainty ahead of the EU referendum as a key reason for the slowdown, with more than 80 per cent of the poll carried out before the Brexit decision last Thursday.

Tim Moore, senior economist at Markit, said: “Widespread delays to investment decisions and housing market jitters saw the UK construction sector experience its worst month for seven years in June.”

The economist stated that this could be more than a short-term, referendum-related blip. “The extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook,” he cautioned.

“The worry is that the ensuing political turmoil will hit construction spending decisions for some time to come,” Mr Moore said. This feeling has been echoed in other industries in recent days.

As PMI figures are based on hard data about purchasing in the construction industry they are seen as a good predictive measure of things to come.

Lets hope that this is not the case and it is just a minor knock of confidence. However, the due to the result of the referendum and the even greater uncertainty now created, the industry might be in a state of limbo for a while yet.

Our message is that the foundations of our industry are still in place, and that we should continue to build on it to prosper rather than let BREXIT deconstruct all the hard work of the industry.

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