Construction activity drops in wake of Brexit vote

Construction output is at its lowest since June 2009 '“ the tail end of the last recession '“ as the recent Brexit vote has seen the sector's clients sit on their hands regarding new projects, fresh data shows today.

Commercial building work saw its steepest fall in more than six years. Picture: Steven Scott Taylor

The closely-watched Markit/Cips construction purchasing managers’ index (PMI) came in at 45.9 for July, below the 50 no-change threshold for the second month running, and down fractionally from 46 in June.

This was largely driven by the steepest fall in commercial building for six and a half years, while residential construction also fell “at a solid pace” and civil engineering was in negative territory.

The report said: “Survey respondents noted that uncertainty following the EU referendum had dampened client confidence, led to greater risk aversion, and encouraged a wait-and-see approach to decision making.”

Insufficient new work to replace completed projects resulted in the first decline in construction sector headcount numbers since May 2013, the survey added, with accompanying “weak demand for sub-contractors”.

Tim Moore, senior economist at Markit, said: “July’s survey is the first construction PMI compiled entirely after the EU referendum result and the figures confirm a clear loss of momentum since the second quarter of 2016, led by a steep and accelerated decline in commercial building.”

City economists said the woes in construction – accounting for about 7 per cent of GDP – added to a report yesterday showing that manufacturing – 12 per cent of the economy – had slumped to its lowest level in three years made it highly likely the Bank of England will cut interest rates to historical lows of 0.25 per cent later this week.

• The second joint conference organised by Construction Scotland and the Construction Scotland Innovation Centre (CSIC) is to be held next month, bringing together hundreds of the industry’s key influencers and decision makers.

Key themes for the free event – which takes place at the Hilton Hotel in Glasgow on 13 September – include innovation, productivity, digitisation and building information modelling.

Alistair McKinnon, director of construction at Scottish Enterprise, said: “The construction sector is a key platform for our whole economy in Scotland and underpins everything we do, from our roads to homes, office buildings, schools and hospitals to name just a few.

“Making construction more productive and profitable will mean that we will all enjoy significant economic benefits. If you are in this sector, this is a must-attend event.”