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Construction activity slows with housebuilding hardest hit

The UK’s construction industry suffered its worst contraction since 2009 in June as uncertainty around the EU referendum led to concern in the market, according to a newly released survey which was largely conducted prior to the EU vote on 23 June.

The Markit/CIPS construction purchasing managers’ index dropped to 46.0 in June, its lowest level since June 2009, in what could be a sign of worse to come.

The figure recorded in June is a sharp fall from the 51.2 in May, and is the first time the index has fallen below 50, which indicates contraction, since April 2013.

“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,” said Tim Moore, senior economist at Markit.

“The latest figures raise the likelihood that the Bank of England will inject additional stimulus this summer in an attempt to dampen the short-term impact of Brexit uncertainty on the real economy.”

Bank of England Governor Mark Carney said last week that he thought the central bank would have to provide more stimulus for the economy over the summer as it reels from the shock of a decision to exit the EU.

Activity in the housebuilding sector was hardest hit in June, closely followed by commercial work.

Howard Archer, chief UK and European economist at IHS Global Insight, described the findings from the survey as “absolutely dire”.

He commented: “The survey can only intensify concern as to just how much the construction sector will be hampered by the Brexit vote.

"The purchasing managers’ survey points to the construction sector taking a major hit from heightened uncertainty even before the UK voted for Brexit.

“The government will be particularly worried to see housebuilding contract at the fastest rate since December 2012 and the second fastest rate since April 2009, given that it is looking to address the UK’s acute housing shortage.”

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