Wednesday 26 April 2017

Fears for Irish exporters as UK construction slows

British PM Theresa May
British PM Theresa May
Colm Kelpie

Colm Kelpie

A slowdown in the growth of UK construction activity has added to fears that the country's economy may be starting to cool.

March saw only a marginal rise in new work across the British construction sector, with a weak rise in home building in particular. Any fall-off in activity in the sector is bad news for Ireland, where exports of everything, from timber and pre-cast concrete, to architectural and engineering services are heavily reliant on the huge British market.

Enterprise Ireland has indicated that those involved in the supply of construction materials are among the sectors most heavily reliant on UK exports, with as much as 90pc of sales in some segments made in Britain.

Howard Archer of IHS Global Insight said the Purchasing Managers' Index for the sector was largely "uninspiring".

"Following on from a third successive modestly softer manufacturing purchasing managers survey for March, the lacklustre construction PMI maintains suspicion the UK economy is beginning to falter. Signs of slowing UK growth is particularly evident in consumer spending," he said.

The news comes just a day after data showed that the manufacturing sector lost some of its momentum last month, as export orders grew more slowly and demand for consumer goods faltered against a backdrop of rising inflation pressures.

Sterling's tumble following June's vote to leave the European Union helped manufacturers enjoy their fastest annual growth in three years during the final quarter of last year.

The Construction PMI in the UK for last month, produced by financial information firm Markit, fell to 52.2 in February from 52.5 the previous month, the joint-lowest upturn in overall construction output since last September.

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The PMI survey showed growth in housebuilding slowed to a seven-month low, more than offsetting the best month so far in 2017 for civil engineering firms who were helped by infrastructure spending. Commercial construction also picked up.

The UK economy has so far largely shrugged off any predicted effects of the Brexit vote. It outpaced all G7 countries bar Germany last year, but it is widely expected to slow this year as rising inflation eats into consumer demand and businesses invest less.

But the survey also showed that confidence among construction companies remains robust. Respondents noted that reduced Brexit-related anxiety and the resilient economic backdrop had a positive impact on new invitations to tender.

"This helped underpin an improvement in business confidence regarding the growth outlook," it noted. "Almost half of the survey panel expect a rise in business activity during the year ahead, against only 9pc that forecast a decline."

Civil engineering projects were the construction sector's main growth engine in March, driven by rising infrastructure spending and a strong pipeline of new work. But even if the sector remains upbeat about its prospects, economists are concerned that the economy will start to falter this year, thanks in large part to inflationary pressures brought on by the sharp fall in the value of sterling after the Brexit referendum.

Sterling has fallen over 11pc against the euro since the vote to leave the EU, which was finally triggered by Theresa May, pictured last week. There are mixed views on its likely direction in the coming months.

It slipped to 85.7 pence against the euro yesterday.

Irish Independent

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