Data suggests that activity won’t fall off a cliff but it will slow down in the next 12 months
The CPA/Barbour ABI index of new contract awards in August remained unchanged compared with July, at 139. Given that the previous month’s contract awards suffered a 12% fall, the latest index reading suggests that new contracts have now stabilised following the chaos during the weeks after the referendum, both in the political world and in the financial markets.
However, before we get too excited, they have stabilised at a lower level. This suggests that activity won’t fall off a cliff but it will slow down in the next 12 months as current projects finish and the fall in contract awards now feeds into (a lack of) work on the ground. The CPA has a central scenario anticipating that overall construction output will fall 0.5% in 2017 and the key sectors likely to be affected are commercial and industrial. The CPA/Barbour ABI indices bear this out and show considerable falls in offices, retail and industrial warehouses contract awards compared with a year ago.
Noble Francis, CPA economics director