U.K. Construction PMI Contracts for 2nd Straight Month on Brexit Indecision

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L'Etat et la Caisse des dépôts et consignations apporteront 1,9 milliard d'euros pour financer la construction de 25.000 logements intermédiaires sur cinq ans. /Photo prise le 2 septembre 2014/REUTERS/Philippe Wojazer

Investing.com – Activity in the U.K. construction sector contracted for a second month running in March as uncertainty over Brexit continued to deter investment, while the related weakness of sterling pushed up input prices.

Research firm IHS Markit said its construction purchasing managers’ index rose to 49.7 in March, a marginal improvement from February’s 11-month low but still a second consecutive contraction.

On the index, a reading above 50.0 indicates expansion, below indicates contraction.

IHS economist Joe Hayes noted that the data fueled fears that recent weakness in U.K. construction may represent “a sustained soft patch”, rather than just a blip. “Brexit-related uncertainty continued to generate indecisiveness, ultimately hitting order book volumes,” he said.

Uncertainty surrounding the outcome of the U.K.’s departure from the European Union has had varying impacts on British business activity.

Another IHS Markit report released on Monday showed that manufacturing activity surged to a 13-month high in March due to stockpiling ahead of the Brexit date.

The U.K. had originally been due to leave the EU on March 29, but the deadline was pushed back to April 12 to allow the U.K. parliament more time to approve the withdrawal agreement negotiated by British Prime Minister Theresa May and EU authorities.

However, that bill has failed to gain parliamentary approval for a third time on Friday and no alternative proposals have been approved, leaving a no-deal exit as the default option.

May is scheduled to chair a five-hour cabinet meeting on Tuesday in an attempt to plot out the next course of action.

If May is unable to get parliamentary approval for her deal, then the U.K. will be left with a choice between leaving without a deal, calling an election or asking the EU for a long delay to negotiate a Brexit deal with a much closer relationship with the bloc.

“It is unlikely that next month will bring about any positive news given the challenges of a weaker UK economy, volatile pound and intense competition for new orders, as Brexit continues to cast a long shadow over the sector’s future,” Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply that participates in the survey, said.