Data released on Monday showed that the pace of UK construction slowed more than expected in June. The Markit/CIPS UK construction purchasing managers’ index slipped in contraction, fell to 46.0 from 51.2 in May, marking its lowest level in seven years.
The steep decline in residential building and a reduction in commercial work for the first time since May 2013 are seen as the main reason behind the drop. Residential construction activity fell at the fastest pace since December 2012. Civil engineering activity remained broadly stable in June, while commercial building work saw a sharp loss of momentum and posted one of its weakest readings for six-and-a-half years.
Latest data also pointed to the sharpest drop in new business volumes since December 2012 on account of heightened uncertainty. Softer demand conditions weighed on staff recruitment in June and contributed to a drop in purchasing activity for the first time in just over three years.
“The vast majority of June’s survey responses were received ahead of the EU referendum, so the worry is that the ensuing political turmoil will hit construction spending decisions for some time to come,” said Tim Moore, Senior Economist at Markit.
Business confidence regarding the year-ahead outlook also fell to the weakest since June 2013. Uncertainties in both the global and UK economies and the hesitance shown by clients to commit to projects before the EU referendum caused the steep decline in new orders.
“The latest figures raise the likelihood that the Bank of England will inject additional stimulus this summer in an attempt to dampen the short-term impact of Brexit uncertainty on the real economy,” adds Tim Moore
The material has been provided by InstaForex Company – www.instaforex.com