Britain’s builders endure tough April

Britain’s builders endure tough April as construction activity slows ahead of June’s European Union membership referendum

  • Data suggests economy is losing momentum as EU vote on June 23 nears
  • After weak manufacturing report yesterday, Services PMI due tomorrow
  • Official numbers showed UK economic growth slowed in the first quarter 

Builders had a tough time in April as growth in the construction sector slowed to its lowest level for almost three years, amid ‘clouds of uncertainty’ ahead of next month’s EU referendum.

The closely-watched Markit construction sector purchasing managers’ index showed a reading of 52.0 last month, down from 54.2 in March, and the weakest it has been since June 2013. A reading above 50 indicates expansion.

The latest weak data comes after a Markit PMI report yesterday showed a surprise contraction in manufacturing activity last month, and added to evidence that the upcoming referendum is taking its toll on the UK economy.

The figures caused a further sell-off in the pound this session, after a sharp reversal yesterday against both the dollar and the euro.

At lunchtime, sterling was trading at €1.2603 versus the euro and $1.4466 against the dollar, extending earlier falls after the data, having opened at €1.2665 and $1.457 respectively this morning.

Currency traders will be watching tomorrow morning’s services PMI closely, and another miss could spell further woe for sterling.

This morning’s PMI figures follow a string of bad data for the UK economy over the past month.

Last week official numbers revealed that UK economic growth slowed to 0.4 per cent in the first quarter, down from 0.6 per cent growth in the previous three months, and economists are now expecting output to ease back further in the second quarter.

Tim Moore, senior economist at Markit, said: ‘UK construction firms reported their worst month for almost three years in April, meaning that the first quarter slowdown is unlikely to prove temporary.’

He added: ‘Softer growth forecasts for the UK economy alongside uncertainty ahead of the EU referendum appear to have provided reasons for clients to delay major spending decisions until the fog has lifted.’

However the figures should have come as no surprise to markets.

Last month, the Bank of England warned that there were signs the EU membership referendum vote was weighing on investment and commercial property sales.

David Noble, group chief executive at the Chartered Institute of Procurement & Supply, said: ‘Fears over weaker UK and global economic growth dealt a blow to confidence in the construction sector, leading to delays in new spending commitments.

‘The prospect of the EU referendum and its outcome in June are likely to add to uncertainty too, with many construction firms preferring to wait and see what happens before making any decisions.’

The Markit report also revealed a renewed drop in confidence amongst the sector.

Construction firms reported a ‘general unwillingness to commit to new projects’ among clients, according to the survey.

Builders have also been taking on more sub-contractors rather than hiring staff to tide them over until the outlook becomes clearer.

Howard Archer, chief UK and European economist at IHS Global Insight, said the construction PMI adds to the rapidly mounting evidence that the UK economy is stalling.

He predicts UK growth will slow further, to 0.3 per cent in the second quarter, or even 0.2 per cent if the services sector also begins to suffer.


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