Construction Weakest In Seven Years

Construction in the UK has dived at its sharpest rate since June 2009 - to a seven year low.

The Markit/CIPS Purchasing Managers' Index (PMI) came in at 46.0 in June, down from 51.2 in May and crucially below the 50 mark, which means output is falling.

PMIs are a closely-watched barometer of business confidence in an industry. Anything below 50 means the sector is contracting rather than growing.

It (Other OTC: ITGL - news) 's the first time the construction industry has reported a contraction since April 2013.

The data from June shows output fell across the board. Residential construction was the worst affected, although commercial building fell for the first time since May 2013 and had one of its weakest performances in six-and-a-half years.

The survey was largely completed before the Referendum on 24 June, but many respondents cited uncertainty ahead of the EU vote as a reason for the slowdown.

Tim Moore, senior economist at Markit (NasdaqGS: MRKT - news) , said: "Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum.

"However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook.

"The vast majority of June’s survey responses were received ahead of the EU referendum, so the worry is that the ensuing political turmoil will hit construction spending decisions for some time to come."

Brexit caution was also blamed for the sharpest fall in new business orders since December 2012, and for putting a brake on recruitment in June.

Chief UK Economist at IHS Global, Howard Archer said the "absolutely dire survey... can only intensify concern as to just how much the construction sector will be hampered by the Brexit vote."

Since the Referendum, housebuilding stocks have been some of the worst affected, with many falling nearly 30% on the day, as investors fear the sector will be one of the most vulnerable to a potential post-Brexit slowdown.

Today, property companies led the fallers on the FTSE 100. Taylor Wimpey (LSE: TW.L - news) was down 4%, closely followed by British Land (LSE: BLND.L - news) , Barratt Developments (LSE: BDEV.L - news) , Persimmon (Other OTC: PSMMF - news) and Berkeley Group, which all fell more than 3%.