Clients holding back on awarding work, due to uncertainty around the UK鈥檚 exit from the EU

Builders

Source: Shutterstock.com / Zoran Ras

Brexit fears and a subdued economy continued to dampen activity across the UK construction sector last month, according to new research.

Construction output fell for the third month in a row in July, according to the latest IHS Markit/CIPS survey, fuelled by a downturn in commercial work and civil engineering activity.

The survey also found a sharp fall in new orders, with companies pointing to subdued economic conditions and what it labelled 鈥渄omestic political uncertainty鈥�.

Anecdotal evidence suggested uncertainty around Brexit meant clients were either delaying work or were unwilling to commit to projects, Markit said.

House building fell for the second month in a row, although not as badly as the three-year record decline seen in June.

Markit said companies had pointed the finger at sluggish housing market conditions which had hit residential work in July.

The IHS Markit/CIPS construction purchasing managers鈥� index reported a score of 45.3 last month, better than June鈥檚 43.1, but still below the 鈥渘o change鈥� level of 50 for the fifth month in the past six.

Tim Moore, economics director at IHS Markit, said UK construction output remained on a downward trajectory and a turnaround in the coming months was unlikely.

鈥淐onstruction companies have started to respond to lower workloads by cutting back on input buying, staffing numbers and sub-contractor usage.

鈥淚f the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain and spill-overs to other parts of the UK economy will quickly become apparent.鈥�

Jonathan Garrett, associate director in Lloyds Bank Commercial Banking鈥檚 infrastructure and construction team, said many in the industry would be feeling 鈥渇ar from confident鈥� despite the slight rebound from June鈥檚 figures.

鈥淟ooking ahead, many contractors are citing October鈥檚 VAT changes as a major cause for concern, with the loss of the 20% payment on submission of bills likely to hit cashflow levels significantly and place more strain on working capital.

鈥淎t a time of slim margins and prevalent uncertainty, many we hear from say they would rather they didn鈥檛 have yet another headwind to contend with,鈥� Garrett added.

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