Construction
activity slumped in January as Brexit fears intensified among firms, according
to the latest survey of the sector.
The Purchasing
Managers’ Index (PMI) fell
to 50.6 in the month, down from 52.8 previously, and only marginally above the
50 mark that separates expansion from contraction.
It was the weakest
reading since March 2018, when builders downed tools in the Beast from the East
snowstorms.
“Delays to client
decision-making on new projects in response to Brexit uncertainty was cited as
a key source of anxiety at the start of 2019,” said Tim Moore of IHS
Markit, which compiles the survey.
All three main
sectors – residential, commercial and civil engineering – weakened during
December and new business growth was the lowest in eight months.
“The sector suffered
a sharp drop in output growth in January, and the softest rise in purchasing
volumes since September 2017, as Brexit continues to hamper progress and dampen
client confidence,” said Duncan Brock of the Chartered Institute of Procurement
& Supply, which sponsors the PMI survey.
The announcement follows the launch of the latest Impact
of Government Policy Index (IGPI), which shows small construction firms
shouldering a 28% increase in policy-linked costs since 2011, a greater rise
than any other sector.
On average, small
VAT-registered firms across the UK have each suffered a 15% – equivalent to
£60,000 – increase in costs stemming from government interventions since 2011.
FSB National
Chairman Mike Cherry said: “Spiralling employment costs, skills shortages and a
weak pound have made it increasingly tough for small construction firms to grow
in recent years.
“The PMI brings into
sharp relief the impact that political uncertainty is having on one of our most
important sectors.
"Small business
confidence is at a seven-year low. Two-thirds of firms are not planning to
increase investment and, with inward migration from the EU down, more than a
third say lack of the right staff is holding them back. A lot of small construction
firms rely heavily on mid-skilled employees from Europe.
“To be less than 60
days out from Brexit day and still have no idea what business environment we’ll
be operating in on 30 March is completely debilitating. Politicians from all
sides of the house must work together to end the impasse.
“Come
the beginning of April, small construction firms will not only have Brexit to
think about but also Making Tax Digital, rising pressure on wages, higher
auto-enrolment contributions and further business rates hikes. It’s a
flashpoint that could threaten the futures of many.”
