Wednesday 2 October 2019 10:08 am

UK construction activity suffers ‘devastating’ drop as Brexit kills demand

UK construction activity fell at the second-fastest rate since the financial crisis in September, a closely-followed survey of the industry showed today.

Read more: Job losses mount as Brexit fears hit UK manufacturing

A historically steep drop in new orders led to firms trimming employment at their fastest pace since the end of 2010, according to data firm IHS Markit and the Chartered Institute of Procurement and Supply (Cips), who produced the survey.

IHS Markit’s construction purchasing managers’ index (PMI) registered a score of 43.3 in September, meaning the sector shrank more severely than in August, when the score was 45. A reading below 50 indicates contraction.

The pound dropped sharply following the news, and was down around 0.5 per cent against the dollar by 10am at $1.223.

“The construction sector offered another devastating result in September with the second fastest fall in new orders since March 2009 and the financial crisis,” said Duncan Brock, group director at Cips.

“After a relentless six-month decline in order books driven by Brexit uncertainty and political indecision, this is hardly surprising.”

Political uncertainty and a slowdown in global growth have hit all sectors of the UK economy in recent months. Yesterday, the manufacturing sector was shown to be teetering on the edge of recession, causing job losses to mount.

Joe Hayes, economist at IHS Markit, said: “Activity is being pulled down at its second-fastest clip for over a decade as firms are buffeted by client hesitancy, heightened Brexit uncertainty and a weak outlook for the UK economy.”

Max Jones, relationship director in Lloyds Bank’s construction team, said: “A negative reading does little to boost confidence within the industry.” 

“The fate of some of the UK’s biggest infrastructure projects remains a major concern and any high-profile cancellations will be a blow to firms across the whole supply chain.”

“Wider economic issues that are impacting sectors such as retail are affecting investment decisions and contractors are bearing the brunt of these, particularly on commercial projects in the regions. Some clarity over the coming months is needed.”

Consumer demand, buoyed by record-low unemployment and rising wages, has been a bright spot in the British economy. Yet there are growing signs that it is falling away.

Read more: US factories suffer worst month since 2009 – and Trump blames the Fed

“Overall, the performance of the UK economy once again hinges on the service sector showing a marked degree of resilience to offset the weakness seen in construction and manufacturing,” Hayes said.

More to follow.

(Image credit: Getty)