Market Analysis

Brexit uncertainty sparks a sharp decline in UK construction activity

The United Kingdom construction PMI slipped into contraction for the month of February with a weaker-than-expected 49.5 headline reading. February’s reading fell short of January’s 50.5 reading expected and also marked the lowest United Kingdom construction PMI in over eleven months.

Construction activity in the United Kingdom has been tracking lower over recent months alongside manufacturing and industrial orders, with Brexit uncertainty featuring heavily in last months UK Construction PMI decline, with business leaders noting that companies are holding back on projects until the outcome of Brexit is known.

The report showed that a drop in commercial and civil engineering construction activity were the key drivers behind February’s contraction, with both sector recording steep falls. Details inside the PMI survey also showed that the UK residential property sector remained solid in February, although a decline in consumer sentiment leading up to Brexit could see residential property sales start to suffer.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said that Brexit is hurting United Kingdom builders, leaving clients nervous and also creating shortages of UK building materials through stockpiling. Stockpiling has been a major concern leading up to March 29th, with UK businesses increasingly unsure how a no-deal scenario could affect UK imports and exports.

Aside from the March 2018 construction PMI, which fell due to extreme weather conditions inside the UK, yesterday’s PMI reading was the weakest in eighteen months. It is likely that next months construction PMI will be below the 50 reading needed for expansion, which could lead to fears that the UK economy will fall into an economic recession during the second fiscal quarter of 2019.



EUR/GBP Daily Mount Chart | Source-Activtrader Platform

EUR/GBP Daily Mount Chart | Source: ActivTrader 


The EUR/GBP pair has been under heavy downside pressure since speculation started to build that British PM Theresa May could extend Article 50. Technically, the 0.8620 level is pivotal level to watch, with the EUR/GBP pair likely to move in a much lower trading range while below this key level. To the upside, the 0.8850 level is major technical resistance if we see any strong rallies occur above the 0.8620 level.


Written by Nathan Batchelor, External Analyst


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