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UK construction sector suffers worst month in 10 years as Brexit bites - business live UK construction suffers worst month in 10 years as Brexit bites - business live
(32 minutes later)
Economist Sam Tombs of Pantheon says Brexit uncertainty is having an increasingly painful impact on UK construction.
The slump in Markit's construction PMI in June points to a worrying step change in the impact of Brexit uncertainty on the economy. Builders unambiguous that Brexit/political risks are to blame for caution among clients. But don't panic, I'm sure Boris & co have a plan... pic.twitter.com/QKn9miX2RG
Only the “pathologically optimistic” observer could expect Britain’s construction sector to recover anytime soon, says Blane Perrotton, managing director of property consultancy and surveyors Naismiths.
He says:
“This is less of a slide than a sledgehammer. After licking its wounds from a lean May, the construction industry has once again been ambushed by plummeting investor demand.
“In an industry that still bears the scars of the crash a decade ago, the news that output is once again falling as fast as it did in the dark days of 2009 will send a chill down many builders’ spines.
“Apart from a brief flurry of stockpiling in advance of March 29th – what should have been Brexit Day – the first half of 2019 has been grim across much of the construction sector.
Simon Harvey of currency exchange firm Monex Europe agree that June’s construction PMI is much worse than feared.
Massive miss in UK construction PMI which doubles down on yesterday's dismal manufacturing reading. UK Construction industry suffered its worst month in 10-years with LT investment being postponed due to Brexit, and a lot of the backlog worked through.
New orders fell by the most in 10 years, with slowing external demand also a concern. Housing activity falls to show the lowest reading since June 2016, reversing the expansionary trend.
Today’s grim construction PMI report has hurt the pound, sending sterling to a two-week low of $1.261 against the US dollar.Today’s grim construction PMI report has hurt the pound, sending sterling to a two-week low of $1.261 against the US dollar.
Michael Hewson of CMC Markets says the City is alarmed to see UK construction falling at the fastest rate since April 2009 -- during the last recession.Michael Hewson of CMC Markets says the City is alarmed to see UK construction falling at the fastest rate since April 2009 -- during the last recession.
He explains:He explains:
On the currencies front the pound is amongst the worst performers after a shocking miss in the latest construction PMI for June saw economic activity slide to 43.1, its weakest level since April 2009. There is no sugar-coating these numbers, they are awful. Far from seeing an improvement to 49.2, from 48.6, activity has collapsed with the home building sub component turning negative for the first time in 17 months.On the currencies front the pound is amongst the worst performers after a shocking miss in the latest construction PMI for June saw economic activity slide to 43.1, its weakest level since April 2009. There is no sugar-coating these numbers, they are awful. Far from seeing an improvement to 49.2, from 48.6, activity has collapsed with the home building sub component turning negative for the first time in 17 months.
It would appear that the recent stalling of house prices is seeing a slowdown in this particular sector. New orders also fell sharply as the Brexit limbo puts companies off any imminent plans to make long term investments. It also calls into question the Bank of England thinking that a rate rise is more likely than a rate cut.It would appear that the recent stalling of house prices is seeing a slowdown in this particular sector. New orders also fell sharply as the Brexit limbo puts companies off any imminent plans to make long term investments. It also calls into question the Bank of England thinking that a rate rise is more likely than a rate cut.
The news that Britain’s construction sector just suffered its worst month in a decade has alarmed commentators and investors.The news that Britain’s construction sector just suffered its worst month in a decade has alarmed commentators and investors.
Here’s some snap reaction:Here’s some snap reaction:
Pain of Brexit indecision felt across house building, commercial and civil engineering reports @IHSMarkitPMI June construction PMI at 43.1 down sharply from 48.6 previous monthPain of Brexit indecision felt across house building, commercial and civil engineering reports @IHSMarkitPMI June construction PMI at 43.1 down sharply from 48.6 previous month
Seeing as big construction projects often overrun in terms of cost and time, is it possible the dreadful UK construction PMI report for June was as an overshoot of the 29 March UK departure date? #BrexitSeeing as big construction projects often overrun in terms of cost and time, is it possible the dreadful UK construction PMI report for June was as an overshoot of the 29 March UK departure date? #Brexit
Wretched UK Construction PMI - weakest since 2009, hammered by Brexit uncertainty"The pain of Brexit indecision was felt across all three sub-sectors but the previously resilient housing sector suffered the fastest drop in three years which is frankly worrying news." -@cipsnews pic.twitter.com/zAtHnI0GBgWretched UK Construction PMI - weakest since 2009, hammered by Brexit uncertainty"The pain of Brexit indecision was felt across all three sub-sectors but the previously resilient housing sector suffered the fastest drop in three years which is frankly worrying news." -@cipsnews pic.twitter.com/zAtHnI0GBg
Construction PMI at its lowest since April '09, note: a reading below fifty suggests the construction sector is in contraction. Makes that 300,000 news homes a year target a tad tricky pic.twitter.com/z93CeP59gHConstruction PMI at its lowest since April '09, note: a reading below fifty suggests the construction sector is in contraction. Makes that 300,000 news homes a year target a tad tricky pic.twitter.com/z93CeP59gH
Today’s PMI report shows clearly that UK construction activity has taken a nasty tumble in the last few months:Today’s PMI report shows clearly that UK construction activity has taken a nasty tumble in the last few months:
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, says building firms are trapped in “quicksand” by political uncertainty:Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, says building firms are trapped in “quicksand” by political uncertainty:
“Purchasing activity and new orders dropped like a stone in June as the UK construction sector experienced its worst month for a decade.“Purchasing activity and new orders dropped like a stone in June as the UK construction sector experienced its worst month for a decade.
“This abrupt change in the sector’s ability to ride the highs and lows of political uncertainty shows the impact has finally taken its toll as new orders dried up and larger contracts were delayed again. The pain of Brexit indecision was felt across all three sub-sectors but the previously resilient housing sector suffered the fastest drop in three years which is frankly worrying news“This abrupt change in the sector’s ability to ride the highs and lows of political uncertainty shows the impact has finally taken its toll as new orders dried up and larger contracts were delayed again. The pain of Brexit indecision was felt across all three sub-sectors but the previously resilient housing sector suffered the fastest drop in three years which is frankly worrying news
Tim Moore, associate director at IHS Markit, says building companies are suffering from the lack of clarity over Britain’s future:Tim Moore, associate director at IHS Markit, says building companies are suffering from the lack of clarity over Britain’s future:
Delays to new projects in response to deepening political and economic uncertainty were the main reasons cited by construction companies for the fastest drop in total construction output since April 2009. While the scale of the downturn is in no way comparable that seen during the global financial crisis, the abrupt loss of momentum in 2019 has been the worst experienced across the sector for a decade.Delays to new projects in response to deepening political and economic uncertainty were the main reasons cited by construction companies for the fastest drop in total construction output since April 2009. While the scale of the downturn is in no way comparable that seen during the global financial crisis, the abrupt loss of momentum in 2019 has been the worst experienced across the sector for a decade.
“Greater risk aversion has now spread to the residential building sub-sector, as concerns about the near-term demand outlook contributed to a reduction in housing activity for the first time in 17 months.“Greater risk aversion has now spread to the residential building sub-sector, as concerns about the near-term demand outlook contributed to a reduction in housing activity for the first time in 17 months.
“Construction companies reported a continued brake on commercial work from clients opting to postpone spending, with decisions on new projects often pending greater clarity about the path to Brexit. Latest data meanwhile indicated another sharp fall in civil engineering, which also reflected delayed projects and longer wait times for contract awards.“Construction companies reported a continued brake on commercial work from clients opting to postpone spending, with decisions on new projects often pending greater clarity about the path to Brexit. Latest data meanwhile indicated another sharp fall in civil engineering, which also reflected delayed projects and longer wait times for contract awards.
UK builders also reported that new orders dropped at the fastest rate in over 10 years, while demand for construction products and materials fell at the sharpest pace since the start of 2010.UK builders also reported that new orders dropped at the fastest rate in over 10 years, while demand for construction products and materials fell at the sharpest pace since the start of 2010.
Britain’s construction sector suffered as “sharp drop in momentum” last month, says data firm Markit.Britain’s construction sector suffered as “sharp drop in momentum” last month, says data firm Markit.
In a very worrying healthcheck on the construction sector, Markit has found that business activity and incoming new work both fell at the fastest pace for just over 10 years.In a very worrying healthcheck on the construction sector, Markit has found that business activity and incoming new work both fell at the fastest pace for just over 10 years.
Housebuilding, commercial construction and big civil engineering work all contracted during the month -- a bad sign for the whole construction sector.Housebuilding, commercial construction and big civil engineering work all contracted during the month -- a bad sign for the whole construction sector.
Builders across the country blamed “risk aversion among clients in response to heightened political and economic uncertainty.”Builders across the country blamed “risk aversion among clients in response to heightened political and economic uncertainty.”
That suggests people are simply unwilling to take risks while they don’t know how the Brexit crisis will be resolved.That suggests people are simply unwilling to take risks while they don’t know how the Brexit crisis will be resolved.
This has dragged the IHS Markit/CIPS UK Construction Total Activity Index down to just 43.1 in June, down sharply from 48.6 in May. Any reading below 50 shows a contraction, and this shows the steepest reduction in overall construction output since April 2009.This has dragged the IHS Markit/CIPS UK Construction Total Activity Index down to just 43.1 in June, down sharply from 48.6 in May. Any reading below 50 shows a contraction, and this shows the steepest reduction in overall construction output since April 2009.
The fall in house building was the largest reported for three years, which construction companies linked to weaker demand conditions and concerns about the outlook for residential sales.The fall in house building was the largest reported for three years, which construction companies linked to weaker demand conditions and concerns about the outlook for residential sales.
NEWSFLASH: Construction output in the UK has fallen at the steepest rate since April 2009!NEWSFLASH: Construction output in the UK has fallen at the steepest rate since April 2009!
That’s according to data firm Markit, and its latest survey of purchasing managers. More to follow.....That’s according to data firm Markit, and its latest survey of purchasing managers. More to follow.....
There’s not much warmth in this new heatmap of Britain’s housing market, from Nationwide this morning:There’s not much warmth in this new heatmap of Britain’s housing market, from Nationwide this morning:
Lucy Pendleton, director of estate agents James Pendleton, agrees that the political deadlock since the EU referendum has deterred some house-buyers.Lucy Pendleton, director of estate agents James Pendleton, agrees that the political deadlock since the EU referendum has deterred some house-buyers.
“Nationally, it’s no coincidence that this is the seventh consecutive month of sub-1% annual growth on the third anniversary of the Brexit vote.“Nationally, it’s no coincidence that this is the seventh consecutive month of sub-1% annual growth on the third anniversary of the Brexit vote.
Growth has been slowing steadily ever since the summer of 2016 as political upset has trimmed people’s risk appetite.Growth has been slowing steadily ever since the summer of 2016 as political upset has trimmed people’s risk appetite.
The threat of a no-deal Brexit this autumn is hurting the UK housing market, says Andrew Montlake, director of mortgage broker Coreco.The threat of a no-deal Brexit this autumn is hurting the UK housing market, says Andrew Montlake, director of mortgage broker Coreco.
“The impact of political events on sentiment has been palpable in recent weeks and this is reflected in the June house price index.“The impact of political events on sentiment has been palpable in recent weeks and this is reflected in the June house price index.
“In April and May, there was a renewed vigour among buyers and sellers alike as the March 29 Brexit deadline passed.“In April and May, there was a renewed vigour among buyers and sellers alike as the March 29 Brexit deadline passed.
“In June, demand dropped off again following the resignation of Theresa May and the increased likelihood of a no-deal Brexit.“In June, demand dropped off again following the resignation of Theresa May and the increased likelihood of a no-deal Brexit.
“There’s without doubt a degree of Brexit apathy out there driving transactions but no-deal is increasingly at the back of people’s minds.“There’s without doubt a degree of Brexit apathy out there driving transactions but no-deal is increasingly at the back of people’s minds.
Here’s a full breakdown of UK house prices by region.Here’s a full breakdown of UK house prices by region.
As you can see, London property remains much pricier than the rest of the UK.As you can see, London property remains much pricier than the rest of the UK.
Despite falling for the last two years, prices in the capital are still only around 5% below the all-time highs recorded in early 2017 -- and around 50% higher than in 2007 (compared to 17% higher across the whole UK).Despite falling for the last two years, prices in the capital are still only around 5% below the all-time highs recorded in early 2017 -- and around 50% higher than in 2007 (compared to 17% higher across the whole UK).
Economist Howard Archer of the EY Item Club predicts that Brexit uncertainty will keep dragging the UK housing market back.Economist Howard Archer of the EY Item Club predicts that Brexit uncertainty will keep dragging the UK housing market back.
We believe with Brexit being delayed until 31 October - and it currently very unclear what will happen then – and the domestic UK political situation unsettled, prolonged uncertainty will weigh down on the economy and hamper the housing market.We believe with Brexit being delayed until 31 October - and it currently very unclear what will happen then – and the domestic UK political situation unsettled, prolonged uncertainty will weigh down on the economy and hamper the housing market.
Consumers may well be particularly cautious about committing to buying a house, especially as house prices are relatively expensive relative to incomes. Indeed, consumer confidence dipped in June. Also it looks questionable whether the labour market and earnings growth will sustain their recent strength as companies tailor their behaviour to a lacklustre domestic economy, prolonged Brexit uncertainties, an unsettled UK political situation and a challenging global environment.Consumers may well be particularly cautious about committing to buying a house, especially as house prices are relatively expensive relative to incomes. Indeed, consumer confidence dipped in June. Also it looks questionable whether the labour market and earnings growth will sustain their recent strength as companies tailor their behaviour to a lacklustre domestic economy, prolonged Brexit uncertainties, an unsettled UK political situation and a challenging global environment.
Britain’s housing market is stuck “in limbo” awaiting some political and economic direction and certainty, says Jeremy Leaf, north London estate agentBritain’s housing market is stuck “in limbo” awaiting some political and economic direction and certainty, says Jeremy Leaf, north London estate agent
Leaf also reports that some sellers are accepting offers well below their asking price, a sign that the market is subdued:Leaf also reports that some sellers are accepting offers well below their asking price, a sign that the market is subdued:
‘At the sharp end, many buyers in particular are still cautious but looking beyond 31st October whereas successful sellers are facing up to sometimes unpalatable offers in order to move on.’‘At the sharp end, many buyers in particular are still cautious but looking beyond 31st October whereas successful sellers are facing up to sometimes unpalatable offers in order to move on.’
House prices across England are “effectively flat” over the last year, says Nationwide.House prices across England are “effectively flat” over the last year, says Nationwide.
In Scotland, prices have rise by 0.4%, slightly below the national average of 0.5%.In Scotland, prices have rise by 0.4%, slightly below the national average of 0.5%.
Northern Ireland is the strongest performing home nation for house prices, with annual price growth rising to 5.2%. In Wales, prices rose 4.2% in the last year.Northern Ireland is the strongest performing home nation for house prices, with annual price growth rising to 5.2%. In Wales, prices rose 4.2% in the last year.
The long-running gap between house prices in the North and the South of England has narrowed since the Brexit vote, today’s survey shows.The long-running gap between house prices in the North and the South of England has narrowed since the Brexit vote, today’s survey shows.
While prices keep falling in London, Yorkshire & Humberside was the best performing region with prices up 3% over the last year.While prices keep falling in London, Yorkshire & Humberside was the best performing region with prices up 3% over the last year.
Nationwide says:Nationwide says:
“House price growth across northern England (North, North West, Yorkshire & Humberside, East Midlands and West Midlands) averaged 2.1%, remaining ahead of that in the south (London, Outer Metropolitan, Outer South East and East Anglia), which experienced a 0.7% fall.“House price growth across northern England (North, North West, Yorkshire & Humberside, East Midlands and West Midlands) averaged 2.1%, remaining ahead of that in the south (London, Outer Metropolitan, Outer South East and East Anglia), which experienced a 0.7% fall.
Here’s the top line of Nationwide’s house price survey:Here’s the top line of Nationwide’s house price survey:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s housing market remains in the doldrums, according to a new industry survey which shows London prices have now fallen for eight quarters in a row.Britain’s housing market remains in the doldrums, according to a new industry survey which shows London prices have now fallen for eight quarters in a row.
With demand subdued, and Brexit uncertainty rife, annual house prices across the UK only rose by 0.5% in the 12 months to June, a four-month low.With demand subdued, and Brexit uncertainty rife, annual house prices across the UK only rose by 0.5% in the 12 months to June, a four-month low.
That’s down by 0.6% a month ago, meaning that the slowdown that began after the EU referendum in 2016 is persisting.That’s down by 0.6% a month ago, meaning that the slowdown that began after the EU referendum in 2016 is persisting.
Prices inched up by a sickly 0.1% in June alone, pushing the average price of a UK dwelling to £216,515.Prices inched up by a sickly 0.1% in June alone, pushing the average price of a UK dwelling to £216,515.
The Nationwide Building Society, which compiles the data, says the market is “subdued” -- potentially good news for those trying to get onto the housing ladder, but also a sign of weak economic activity.The Nationwide Building Society, which compiles the data, says the market is “subdued” -- potentially good news for those trying to get onto the housing ladder, but also a sign of weak economic activity.
The slowdown is being driven by action (or lack of it) in the capital and the surrounding area.The slowdown is being driven by action (or lack of it) in the capital and the surrounding area.
London house prices are down 0.7% in the last year, while they’ve declined by 1.8% in the Outer Metropolitan Area (the commuter belt around London) and by 1.6% in the South East.London house prices are down 0.7% in the last year, while they’ve declined by 1.8% in the Outer Metropolitan Area (the commuter belt around London) and by 1.6% in the South East.
Robert Gardner, Nationwide’s chief economist, predicts that the situation won’t change for some time, given economic uncertainty:Robert Gardner, Nationwide’s chief economist, predicts that the situation won’t change for some time, given economic uncertainty:
“UK annual house price growth remained below 1% for the seventh consecutive month in June, at 0.5%.“UK annual house price growth remained below 1% for the seventh consecutive month in June, at 0.5%.
“Survey data suggests that new buyer enquiries and consumer confidence have remained subdued in recent months. Nevertheless, indicators of housing market activity, such as the number of mortgages approved for house purchase, have remained broadly stable.“Survey data suggests that new buyer enquiries and consumer confidence have remained subdued in recent months. Nevertheless, indicators of housing market activity, such as the number of mortgages approved for house purchase, have remained broadly stable.
“Housing market trends are likely to continue to mirror developments in the broader economy. While healthy labour market conditions and low borrowing costs will provide underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months.“Housing market trends are likely to continue to mirror developments in the broader economy. While healthy labour market conditions and low borrowing costs will provide underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months.
More to follow....More to follow....
Also coming up todayAlso coming up today
Data firm Markit publishes its survey of UK construction companies, which will give fresh insight into the building sector. This PMI is expected to rise, but still languish below the 50-point mark showing stagnation.Data firm Markit publishes its survey of UK construction companies, which will give fresh insight into the building sector. This PMI is expected to rise, but still languish below the 50-point mark showing stagnation.
Mark Carney has picked a nice day to visit Bournemouth. But he may not enjoy the seaside - instead, the Bank of England governor is speaking at the Local Government Association Annual Conference and exhibition. We’ll watch for any comments about the housing market, the UK economy, interest rates or Brexit.Mark Carney has picked a nice day to visit Bournemouth. But he may not enjoy the seaside - instead, the Bank of England governor is speaking at the Local Government Association Annual Conference and exhibition. We’ll watch for any comments about the housing market, the UK economy, interest rates or Brexit.
We’ll also track the financial markets, after Wall Street closed at a record high last night.We’ll also track the financial markets, after Wall Street closed at a record high last night.
The agendaThe agenda
9.30am BST: UK construction PMI for June (expected to rise to 49.2, from 48.6, still showing contraction)9.30am BST: UK construction PMI for June (expected to rise to 49.2, from 48.6, still showing contraction)
3pm BST: Bank of England governor speaks in Bournemouth.3pm BST: Bank of England governor speaks in Bournemouth.