UK construction PMI drops to seven-year low

The pace of UK construction slowed more than expected in June, data released on Monday showed.

The Markit/CIPS UK construction purchasing managers’ index fell to 46.0 from 51.2 in May, marking its lowest level in seven years and below the 50.0 threshold that separates contraction from expansion for the first time since April 2013.

Economists had been expecting a reading of 50.5.

The deterioration was led by a steep decline in residential building and a reduction in commercial work for the first time since May 2013.

Reports from survey respondents attributed the downturn in business activity to uncertainty ahead of the EU referendum, as just over 80% of survey responses were received before 24 June.

Tim Moore, senior economist at Markit, said: “Widespread delays to investment decisions and housing market jitters saw the UK construction sector experience its worst month for seven years in June.

“Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum. However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook.”

Howard Archer, Chief European & UK economist at IHS Global Insight, said: “This is an absolutely dire survey that fuels serious concern over the construction sector.

“It is evident that the construction sector was hit appreciably by increased caution among clients (especially for major projects) as the run-up to the referendum on EU membership magnified UK and global economic uncertainties. This immediately raises serious concerns as to just how much the construction sector will be hampered by the Brexit vote.”