U.K. Construction May Weaken as ‘Intense’ Brexit Inflation Bites

  • Rising import costs delay contracts, impact decision-making
  • Homebuilding increases at slowest pace in six months

Britain’s construction industry showed signs of weakness last month, with a gauge of demand dropping for a second month.

Some respondents to IHS Markit’s monthly survey said that rising input costs had an “adverse impact” on decision-making and led to delays in contracts. The “intense” inflation was largely due to imports, reflecting the impact of the pound’s decline since the Brexit vote in June.

Markit said its overall index of construction activity rose to 52.5 from 52.2 in January, staying above the 50 level that divides expansion from contraction. But homebuilding increased at the slowest pace in six months and commercial building declined. Growth in new orders was the weakest since October.

“Respondents noted that the resilient economic backdrop and a stabilization in client confidence since the EU referendum continued to help drive construction growth in February,” Markit said. “However, there were also reports that demand growth had softened so far in 2017.”

A separate index published on Wednesday indicated that manufacturing cooled in February. Economists forecast that Markit’s gauge of services, due Friday, also declined.

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