Mounting fears over a no-deal Brexit are causing delays to new building projects across the UK, according to a survey that showed a significant slowdown in growth in the construction sector last month.
IHS Markit and the Chartered Institute of Procurement and Supply said growth eased to the weakest rate in 10 months in January, as the building trade unexpectedly experienced a sharp drop in activity from the previous month.
The survey of purchasing managers in the construction industry – closely monitored by the Bank of England and the Treasury – revealed that Brexit anxieties were among key reasons for delays to decision-making on new projects at the start of 2019, with a corresponding slowdown in progress on new work.
The Markit/Cips UK construction purchasing managers’ index of business activity fell to 50.6 last month from 52.8 in December, far below the forecasts of City economists, and close to the 50 mark that separates growth from contraction.
Construction firms hired staff at the slowest pace since immediately after the EU re vote in July 2016, with optimism in short supply. Building companies said the time it took for a sale to be agreed had increased, reflecting a “wait-and-see” approach to spending by clients.
Blane Perrotton, the managing director of the property consultants Naismiths, said: “Brexit fears have squeezed developer demand ever since the EU referendum, but as the prospect of a no-deal exit looms ever larger, Britain’s builders are grappling with the realisation that things could be even worse than feared.”
Commercial building was the weakest sector of the construction industry, according to the survey, as Brexit-related anxieties and concerns about the health of the British economy weighed on demand for new shops, offices and other commercial property.
Homebuilding was the strongest sector, in a potential reflection of the state support provided by the help-to-buy scheme for first-time buyers.
Max Jones, of Lloyds Bank’s infrastructure and construction team, said projects in London were particularly exposed to the risk of no-deal Brexit.
“While the suggestion is that regional cities like Birmingham, Manchester and Edinburgh are more buoyant, it’s not clear that there is enough activity to pick up the slack from the capital,” he said.
