A steep falloff in the U.K. construction sector dragged down the sovereign state’s economy in June to a sluggish 0.2% growth rate in the second quarter and led to a June Markit/CIPS Purchasing Managers Index (PMI) reading of 51.8, the lowest since March 2013.
The U.K.’s construction sector saw activity fall into contraction territory and at the lowest rate since June 2009—from 51.2 in May to 46.0 in June—following large declines in both housing building and commercial construction, according to Markit chief economist Chris Williamson. “The building sector has seen growth weaken steadily since the start of the year, but June’s fall in activity was the first recorded since 2013,” he said.
Indeed, the Bank of England has reported foreign investors are retreating from investments in commercial real estate in the U.K., while a real estate fund managed by Standard Life Investments suspended withdrawals following an influx of redemption requests—a move the fund hasn’t made since the financial crisis. Singapore’s United Overseas Bank, a large foreign buyer of London property, also decided to temporarily stop lending for U.K. real estate following the U.K. vote.
Meanwhile, the U.K.’s service sector PMI in June from Markit and CIPS shrank to 52.3, a 38-month low reached as companies said uncertainty related to the late June vote to leave the European Union shrank workloads and incoming new business, Markit economists said.
Piling on to the negative news, net job creation dropped to the lowest level since March 2013. “A steepening rate of factory job losses was accompanied by weaker employment growth in both the construction and service sectors, the latter down to a near-three year low,” Williamson said.
- Nicholas Stern, editorial associate