UK construction industry shrinking as Brexit uncertainty delays building projects

Sector in decline for second consecutive month, PMI survey suggests

Britain’s construction sector is shrinking as Brexit-related anxiety continues to delay building projects, an industry survey suggests.

The Markit/CIPS UK construction purchasing managers’ index (PMI) was 49.7 for March, up from 49.5 in February. Any number below 50 indicates that the industry is contracting.

It was the first back-to-back decline since the two months following the EU referendum in June 2016, reflecting “subdued underlying demand”.

Last month, manufacturers indicated a surge in output as factories rushed to stockpile goods ahead of potential Brexit disruption.

Joe Hayes, economist at IHS Markit, which compiles the PMI surveys, said the latest numbers would fuel fears that construction is going through a sustained “soft patch” rather than a blip.

“Brexit-related uncertainty continued to generate indecisiveness, ultimately hitting order book volumes,” Mr Hayes said.

“Furthermore, strong competition for contracts was also reported by some panel members.

“The outlook was subsequently underwhelming by historical standards, with the unsettled political and economic environment keeping business confidence below its long-run average.”

The construction data is the latest in a series of negative economic indicators that will heap further pressure on MPs to agree a way forward on Brexit.

Theresa May summoned her cabinet for crisis talks on Tuesday after MPs once again failed to unite around any Brexit option during a late-night session of indicative votes.

Commercial construction has been hit particularly hard as firms hold back on making decisions amid increasing uncertainty. Business activity dropped more sharply than at any point in the last year.

Residential construction held up relatively well but a weakened pound and a shortage of products helped to push up prices.

Mr Hayes added: “UK construction businesses ramped up their purchases of materials and other inputs, reflecting efforts to build safety stocks ahead of any potential Brexit-related disruptions.”