Belfast Telegraph

Political uncertainty hits construction industry output

Output in Britain's construction industry fell short of expectations last month as heightened political uncertainty continues to weigh on the economy.

The closely watched Markit/CIPS UK Construction purchasing managers' index (PMI) fell to 54.8 in June, down from 56 in May and shy of the 55 economists had expected.

A reading above 50 indicates growth.

A lack of new work to replace completed projects weighed on the sector during the period, with data indicating that new order growth eased to its weakest since March.

"A number of firms cited delays in decision making among clients, partly linked to heightened economic uncertainty," Markit said.

Tim Moore, senior economist at IHS Markit, added: "Fragile business sentiment led to delayed decision-making on large projects and greater concern about the outlook for workloads during the next 12 months.

"While construction firms remain upbeat overall about their near-term growth prospects, the degree of confidence fell to its lowest so far this year."

Construction companies were the least optimistic about their near-term growth prospects since December 2016, with the Government's faltering Brexit negotiations blamed for the despondency.

Costs for builders have also increased substantially, Markit said, with the collapse in the Brexit-hit pound resulting in sharp price hikes for imported construction materials,

However, housebuilding activity was still at the second highest level since December 2015.

Howard Archer, chief economic adviser to EY ITEM Club, said: "Weakened economy activity and appreciable economic and political uncertainties threaten to be a damaging combination for the construction sector over the coming months.

"Meanwhile, construction companies are being squeezed by elevated input costs.

"There is the particular concern that potential clients will be cautious over committing to major projects given the slowing economy and increased political uncertainties, including Brexit negotiations."

On Monday, activity in Britain's manufacturing industry also came in shy of expectations as a slowdown in new orders sent output drifting to a three-month low, piling on further economic misery.

It came as UK economic growth was confirmed at 0.2% for the first quarter last week, a marked slowdown compared with an expansion of 0.7% seen in the final three months of 2016.

British households are also facing a sustained squeeze on their finances as disposable incomes shrink and the amount set aside for savings hits record lows.