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Construction PMI Slips into Decline Due to Brexit Uncertainty

Residential activity continues to grow but fails to offset shrinking commercial and civil engineering industries

PMI reading of 49.5 is the lowest since September 2017 as Brexit weighs on the UK construction industry

Construction activity in the UK has contracted for the first time in nearly a year, according to the latest Purchasing Managers’ Index (PMI) by IHS Markit and Chartered Institute of Procurement & Supply (CIPS).

Following a sustained period of expansion over the last 10 months, February’s PMI reading came below the 50.0 no-change threshold at 49.5, marking the lowest figure for the index since weather-related disruptions in March 2018.

Disregarding the decline brought on by the month’s unseasonable weather, construction activity saw its worst performance since September 2017.

Residential construction continued to expand for a thirteenth consecutive month, although the growth recorded in February was not enough to offset the declines seen in the commercial and civil engineering sectors.

Respondents to the survey cited Brexit uncertainty as the key driver behind the slowdown in decisions regarding commercial projects and modest client demand, whilst residential activity saw lower transaction volumes and a drop in confidence.

Business expectations for the year ahead remain positive, albeit to a more subdued degree, with construction firms stating that new project starts are being slowed due to clients delaying their decision-making.

“The UK construction sector moved into decline during February as Brexit anxiety intensified and clients opted to delay decision-making on building projects,” said Tim Moore, Economics Associate Director at IHS Markit.

“There were also reports that the more fragile housing market confidence has begun to act as a brake on residential work, which adds to signs that house building has lost momentum since the end of last year.”

Separate research from the Ministry of Housing, Communities and Local Government (MHCLG) revealed that one third of Local Authorities in England failed to reach the government’s 95% pass mark for housing delivery.

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