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Bleak PMI figures cause waves in construction sector
ON 3 September, the UK Construction PMI figures were released, showing that construction output has contracted again in August for the fourth month in a row and new orders fell at the fastest pace for over 10 years.
Faced with this dire data, the Federation of Master Builders (FMB) called on the Government to bring an end to the threat of a No Deal Brexit and give clarity to UK businesses by securing a new deal with the EU.
Brian Berry, chief executive of the FMB, said: “A sustained decline in construction output risks small firms leaving construction altogether, as they struggle to absorb higher costs in an industry notorious for tight margins.
“If we want local builders to deliver the high-quality homes our country needs, to upgrade people’s homes to modern standards and to form the supply chain
for key national infrastructure projects that are essential to helping our economy move forward, then we certainly can’t afford for building companies to go to the wall due to uncertainty. The Government must secure a new deal with the EU which Parliament can accept to deliver certainty and give an injection of confidence to the sector.”
Berry concluded: “Research conducted by the FMB in July found that more than half of small construction companies believe that leaving the EU without a deal would cause material prices to sky-rocket, and just under a third believe it would lead to lower workloads. Construction is like a mirror for the wider economy, as it’s highly sensitive to market confidence. What we’re looking at currently is highly concerning. The Government must negotiate a deal that Parliament can pass in order to avoid a recession.”
Meanwhile, David Vayro, construction
partner at global legal business DWF, added: “The UK construction PMI figures show that output has dropped for the fourth month in a row while optimism has sunk to the lowest level since December 2008.
“None of this is really very surprising, but that doesn’t disguise the fact that it is not good news for the construction sector. There are positive aspects to the context for these adverse trends and the main one, unsurprisingly, is the Government’s attempts to bring Brexit to a head with the Prime Minister’s ‘out by 31 October, deal or no deal’ pledge being given a real edge by the recent prorogation.
“Our sense is that there is a huge amount of pent up demand in the sector, but whether that is realised will depend on the outcome of Brexit and, in any event, may not influence the data for some time yet.”
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