Output in Britain’s construction fell at its fastest level in more than seven years in July, following Britain’s vote to leave the European Union, according to the latest data released by Markit and the Chartered Institute of Procurement & Supply on Tuesday.
Markit and CIPS’ PMI data on the state of the UK’s construction sector showed a reading of 45.9, which was actually substantially better than the 43.8 expected in July, but still represents the worst reading since the middle of 2009, and a further fall from June’s disastrous 46.0 reading.
The purchasing managers index (PMI) figures from Markit are given as a number between 0 and 100
Anything above 50 signals growth, while anything below means a contraction in activity — so the lower the number, the worse the outcome.
In the previous construction PMI survey, the terrible numbers were made even scarier by the fact that roughly 80% of responses to the survey were received before the EU referendum, meaning that activity was slowing even before the UK’s vote to leave the EU.
However since the referendum result, it appears that the construction sector’s slide has slowed somewhat, something that is reflected in the fact that new orders in the industry fell at a slower pace in July than in June, suggesting that the initial shock of Brexit has worn off a little.
Even so, the graph is pretty shocking. Take a look below:
Here’s what Markit senior economist Tim Moore had to say about the numbers (emphasis ours):
“July’s survey is the first construction PMI compiled entirely after the EU referendum result and the figures confirm a clear loss of momentum since the second quarter of 2016, led by a steep and accelerated decline in commercial building. Reduced volumes of new work to replace completed projects contributed to a fall in employment for the first time in just over three years.
“UK construction firms frequently cited ongoing economic uncertainty as having a material negative impact on their order books. In particular, survey respondents noted heightened risk aversion and lower investment spending among clients, notwithstanding a greater number of speculative enquiries in anticipation of lower charges.”
Moore did however note that “it’s not all bad news, at least insofar as the decline in construction output was little-changed from June’s seven-year low. There were also some reports that demand patterns had been more resilient than expected given the uncertain business outlook.”