UK infrastructure spending dives post-Brexit vote

Infrastructure spending in the UK fell sharply since the country voted to leave the European Union in June, putting pressure on the government to go ahead with large-scale construction projects.

The value of infrastructure construction contracts in July fell 20% to £1.5bn, compared to June, and fell 23% year-on-year, according to consultancy group Barbour ABI, which supplies data to the Office for National Statistics. New construction contracts in July were also down £5.8bn.

Michael Dall, chief economist at Barbour ABI, said that the private and public sectors were putting infrastructure projects on hold due to the uncertainty surrounding the aftermath of the Brexit result.

He said: “In the first full month since the vote to leave the European Union, the value of construction projects reaching contract award stage declined in July. This is unsurprising given the uncertainty in the economy. However, it is the infrastructure sector which has performed particularly poorly this month, and with the change in narrative from the current government, it puts more emphasis on any fiscal stimulus that they may be planning to make.”

Prime Minister Theresa May said she would put infrastructure at the centre of plans to invigorate the economy in the wake of referendum result and said the Treasury would fund new projects and launch infrastructure bonds.

However, since the pledge May has hesitated with pressing ahead with key projects such as the Hinkley Point nuclear power plant in Somerset and airport expansion at either Gatwick or Heathrow. May’s predecessor, David Cameron’s premiership failed to deliver on significant infrastructure investment.

Dall said the UK should seize upon the opportunity created by the Bank of England when it lowered interest rates to 0.25% from 0.5% and invest in new projects, which could help stimulate the economy.

He said: “While this is at odds with the austerity agenda of the previous administration, it is one of the few tools the government has available to boost the economy."

Barbour ABI also said that the value commercial office construction contracts in July increased by 22% in July, compared to June.