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UK construction industry slumps dramatically ahead of EU vote

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UK construction industry slumps dramatically ahead of EU vote
Construction workers lay a driveway at a Persimmon construction site. Photograph: Bloomberg/Bloomberg via Getty Images

UK: Britain’s building industry nosedived to its worst performance in seven years last month as a collapse in new orders clobbered firms ahead of the looming EU referendum vote.

One economist described the outlook as dire for the industry after the prospect of a vote to leave the EU sent property investors scurrying for the exit door.

Housing market jitters were blamed for much of the fall in activity, which forced housebuilders across the country to down tools and mothball projects.

Office and factory building was almost as badly hit while business confidence was at its lowest for three years.

The Markit Cips construction purchasing managers’ index (PMI) tumbled to 46 in June, down from 51.2 in May, below the neutral 50 threshold for the first time since April 2013.

The speed of the contraction in June took the industry back into recessionary territory but fell short of the frantic tumble in activity last seen in the post-financial crash era in 2009.

Markit said the figures were overwhelmingly linked to deteriorating order books that meant firms lacked new work to replace completed projects.

“A number of firms commented on reluctance among clients to commence new contracts in the run-up to the EU referendum, alongside ongoing uncertainty about the general economic outlook. Incoming new work has now fallen for two months running, and the latest reduction was the steepest since December 2012,” it said.

Howard Archer, chief economist at IHS Global Insight, said: “This is an absolutely dire survey that fuels serious concern over the construction sector.

“Furthermore, the survey was 80% completed before the UK voted to leave the EU. The survey can only intensify concern as to just how much the construction sector will be hampered by the Brexit vote.”

Tim Moore, senior economist at Markit, said: “Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum.

“However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook.

credit: the guardian/ Philip Inman

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