The Brexit decision permeates every aspect of the British economy. Often, heated arguments between supporters of the decision and those vehemently opposed to it rage. Any positive economic indicator is seized upon by Leavers as evidence that Brexit fears were overblown and that the UK will be just fine outside the EU; immediately, somebody from the remain camp points out that the economic data in question is being produced whilst the UK is still a member of the EU and benefits from the customs union and the single market. Against this backdrop, the impact of Brexit can be gauged by indicators such as business confidence, inwards investment and the post-Brexit planning in the Brexidous of the financiers.
Another Brexit portent is, perhaps, construction. The current IHS Markit/CIPS purchasing managers’ index indicates that the sector is experiencing a contraction. It fell from 51.1 in August to 48.1 last month, on this scale a reading of less than 50 indicates a contraction. This is significant because it is the first decline seen in 13 months and the sharpest fall seen since July 2016. The slump is affecting both commercial building and civil engineering projects. The civil engineering sector has seen its worst contraction for four and a half years as new infrastructure projects are not coming on stream to replace completed ones. The decline seen in commercial properties construction is second only to the immediate post Brexit vote since February 2013. The only ray of sunshine to be found is in the construction of residential properties which managed to expand in September, however the rate of expansion was the slowest seen for six months.
The report suggests that higher costs for imported construction materials represents a drag on the sector (this is due to the relative weakness of the Pound since the Brexit vote) whilst it reports anecdotal evidence that the prospect of a BoE interest rate is generating some concerns over the ending of ultra-low mortgage rates, making borrowing more expensive and weakening demand for new homes.