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Construction posts shock fall in March amid referendum uncertainty

Published 13/05/2016

The ONS said output fell 3.6%, compared with the month before
The ONS said output fell 3.6%, compared with the month before

Construction in Britain posted a shock fall in March, in a further sign that construction projects are slowing down ahead of next month's EU referendum.

The Office for National Statistics (ONS) said output fell 3.6%, compared with the month before, due to declines in the amount of new work being carried out as well as repair and maintenance activity. Economists had forecast a slide of 3.2%.

Over the first three months of the year the ONS revised down its earlier estimate of a 0.9% fall in construction to 1.1% compared with the previous quarter, dragged down falls in infrastructure work and despite growth among housebuilders.

March marked a third consecutive decline in month-on-month construction output - the first such run since the monthly series started in 2010. Construction accounts for around 6% of the UK economy.

The figures come a day after Bank of England governor Mark Carney said a Brexit vote on June 23 could trigger a possible ''technical recession'' in the UK as he warned the fall-out could hit growth, jobs and see the pound plunge in value.

The warning came as the Bank slashed its growth outlook for the next three years and kept rates on hold at 0.5%, where they have been since March 2009.

It cut its UK growth forecasts to 2% in 2016, 2.3% in 2017 and 2.3% in 2018.

This is down from February's forecasts for growth of 2.2% in 2016, 2.4% in 2017 and 2.5% in 2018.

Howard Archer, chief UK and European economist at IHS Global Insight, said that "construction nosedived in March".

He added: "If the referendum results in a vote to stay in the EU, the construction sector will obviously be looking to the reduced uncertainty to cause delayed projects to kick in.

"However, there is the concern for the construction sector that confidence and economic activity may not bounce back that well after the EU referendum and that clients remain reluctant to commit to major projects."

Pantheon Macroeconomics chief UK economist Samuel Tombs said: "The latest construction figures provide yet more evidence that uncertainty about the outcome of the EU referendum is slowing the economic recovery."

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