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U.K. Construction Shrinks for a Third Month on Brexit Woes

U.K. Construction Shrinks for a Third Month on Brexit Woes

(Bloomberg) -- U.K. construction output fell for a third straight month in July as new orders tumbled on Brexit uncertainty and subdued economic growth.

The figures are the latest to paint a picture of a U.K. economy hamstrung by political turmoil, with anecdotal evidence suggesting Brexit-related risk aversion is holding back projects, according to IHS Markit.

U.K. Construction Shrinks for a Third Month on Brexit Woes

The uncertainty may increase as the U.K. heads for its Oct. 31 deadline for leaving the European Union. New Prime Minister Boris Johnson says he is committed to leaving on that date, with or without a deal.

Markit’s activity index stood at 45.3 last month, up from June’s 10-year low of 43.1. It was still weaker than economists forecast and well below the 50 level that indicates expansion. The broad-based drop was driven by commercial work, while confidence among survey respondents was at the lowest since November 2012.

“Construction companies have started to respond to lower workloads by cutting back on input buying, staffing numbers and sub-contractor usage,” said IHS Markit economist Tim Moore. “If the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain and spillovers to other parts of the U.K. economy will quickly become apparent.”

A report on Thursday showed the U.K.’s manufacturing sector is in its worst downturn for six years. Markit will release a similar gauge for the dominant services industry on Monday.

--With assistance from Harumi Ichikura.

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson

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