Steepest Decline In Construction Since 2009

Construction output in the UK has fallen at its sharpest rate since June 2009, hitting 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 rather than growing.

PMIs are a closely-watched barometer of business confidence in an industry. 

It is the first time the construction industry has reported a contraction since April 2013.

The figures from June show output fell across the board. Residential construction was 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 EU referendum, but many respondents cited uncertainty ahead of the vote as a reason for the slowdown.

Tim Moore, senior economist at Markit, 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".

Housebuilding stocks have been badly hit since the referendum, 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 was down 4%, closely followed by British Land, Barratt Developments, Persimmon and Berkeley Group, which all fell more than 3%. 

Also today, ratings agency Standard & Poor's warned of falling investment prospects, both domestically and from overseas, in the wake of the Brexit vote.

It said it assumed a "benign outlook for the housing market," with "modest" price contraction, unless negotiations between the EU and UK become confrontational, which would hit confidence in the industry more severely.  

That chimes with today's Sentix Index of Eurozone confidence, which fell to an 18-month low for July - down to 17 from 9.9 the month before - as investors prepared for continued fallout in the wake of the referendum.