The UK’s construction purchasing managers index (PMI) came in at 46.0 down from 51.2 in May, dropping below the crucial 50 mark.
A PMI index score of above 50 indicates growth, a rate below the crucial 50 figure means that output is in decline.
The uncertainty of the of the EU Referendum has been blamed for the nosedive in the UK’s construction sector to its lowest level since June 2009.
The dramatic fall in PMI is reported to be due to the decline in residential building amid the fall in activity in the commercial sector conceding its weakest performance six and a half years. Lower levels of activity have also seen a reduction in new work which has now fallen for the second month in a row having seen its highest low in December 2012.
Economists’ expectations were that the index would drop to 50.5 in June.
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.
“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.”
As the FTSE 100 has started to make a recovery following the outcome of the vote, shares in construction giants such as Taylor Wimpey remain low at -29% with company shares in Barret Developments and Persimmon’s both dropping almost 30%
The release of the report had an immediate impact as construction companies, house builders led the FTSE 100 down as Taylor Wimpey dropped 4% with British Land, Barret Developments, Persimmon and Berkeley Group all falling more than 3%.
04/07/2016
