Activity within the Construction Sector

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The UK construction industry has moved into a period of uncertainty, with activity in the sector falling to a ten month low. With the country facing a seemingly more bleak economic outlook than previously thought, worry is rife within the construction sector. Senior economists say companies are reporting clients to be ‘hesitant’ in committing resources to new projects, even though underlying conditions still seem to be favourable. With reduced hiring and purchase of materials observed, business confidence in the sector has fallen to a fourteen month low. The figure for Purchasing Managers Index (PMI) for manufacturing fell below its long run average for the first time in three years. This in part has been attributed to the weakening of overseas orders, again blamed on economic uncertainty. The Brexit debate in particular has been seen to foster this attitude amongst European investors. Whilst most construction firms generate the bulk of their revenues within the UK, firms rely on a steady stream of workers coming in from the EU, and with the UK’s future within the union unclear more disruption is anticipated.

More unwelcome news came from the Bank of England in February in the form of downgraded forecasts relating to inflation, growth and wages. In what is anticipated to be a tough budget for George Osbourne come April the chancellor has already sounded the need for further, unspecified spending reductions. Yet with all the gloomy forecasts and lack of confidence Britain’s economy remains the fastest growing in the G7. The hope is that with continued growth pessimism in the sector will slowly be reversed with a resultant increase in both activity and investment.

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