Business activity growth slows to lowest rate in three years thanks to EU referendum uncertainty

state of play

Growth in construction business activity has slowed to its weakest rate in almost three years as uncertainty hits ahead of the EU referendum.

According to the latest Markit/CIPS survey, April’s data signalled a loss of momentum across the UK construction sector with new order volumes stagnating and overall business activity expanding at its slowest since June 2013.

The seasonally adjusted output index registered 52 in April, above the neutral 50 threshold which separates expansion from contraction, but well below the 54.2 registered the previous month.

Commercial building was the strongest performing broad category of activity in April, although the latest upturn was the slowest since July 2013.

Residential construction growth rebounded only slightly from March’s 38-month low, while civil engineering activity expanded at the weakest pace so far in 2016.

Construction companies cited a number of factors weighing on client spending, including heightened uncertainty about the economic outlook and a general unwillingness to commit to new projects.

Tim Moore, senior economist at Markit, said uncertainty about the economic outlook and the EU referendum had hit construction firms and delayed client spending.

He said: “Stalling new order volumes not only set the scene for further weakness ahead, but are already weighing on staff hiring and input buying across the construction sector.

“Softer growth forecasts for the UK economy alongside uncertainty ahead of the EU referendum appear to have provided reasons for clients to delay major spending decisions until the fog has lifted.”

Mark Robinson, Scape chief executive, said that despite the UK remaining attractive for infrastructure investment, “uncertainty about the economic outlook is creating an unwillingness to commit to new projects and major spending decisions.”

He added: “However, looking at the longer term, conditions in the construction sector are likely to change in the second half of this year after the EU referendum in June as companies begin to make more informed and confident decisions.”