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Construction Prospects in the U.K. Look Worse After Brexit Vote

The Construction Citizen team is interested to see what long-term effect the recent vote by the Brits to leave the European Union will have on the building industry in the U.K. So far, there is no doubt things will be worse at least in the short term.

Via Bloomberg News:

Building output fell 2.1 percent in May, almost double the decline forecast in a Bloomberg survey of economists, figures from the Office for National Statistics showed Friday. There were falls in almost every category of work, with private housing down the most in more than a year.

It means production will contract in the second quarter unless June sees a gain of 1.9 percent, a seemingly impossible feat if the latest surveys of the sector are correct. Construction was shrinking even before the referendum on EU membership, with Markit Economics’ purchasing-management index tumbling to a seven-year low in June.

Bloomberg spoke with the chief economist at Markit, Chris Williamson:

“Going forward, prospects look worse, for the short term at least,” said Williamson. “The drop in activity seen in the June construction PMI was fueled by uncertainty about the mere possibility off Brexit. The reality of the U.K. leaving the EU and the associated heightened uncertainty, especially in relation to commercial property and housing investment, is therefore likely to cause further stress in coming months.”

Meantime, the Guardian reports that Standard Life closed its property fund as investors sought to withdraw their money:

The firm halted trading on its Standard Life Investments UK Real Estate Fund and associated funds at midday on Monday, citing “exceptional market circumstances” for the decision. It said the suspension would remain in place until it is “practicable” to lift it, and that it would review the decision at least every 28 days.

The £2.9bn fund, which invests in commercial properties including shopping centres, warehouses and offices, is thought to be the first UK property fund to suspend trading since the 2007-2009 financial crisis, when some of the biggest names in investment management stopped withdrawals because they did not have the money to repay investors.

In numbers released separately, volumes fell 11 percent in May, the steepest drop since mid-2006.