UK construction industry growth could drop by 2% after No-Deal Brexit

    Growth in the UK construction industry could drop by 2% if the UK leaves without a deal, GlobalData reports.

    The data and analytics company stated that the construction industry would continue to grow by 2.2% should there be an agreed deal.  With a No-Deal prospect becoming more likely, this growth projection drops to 0.2%.

    They explain that a Hard Brexit has serious consequences for construction projects, with investors likely to delay or cancel projects until there is greater clarity over a possible future outside the EU.

    ‘The commercial sector would be the hardest hit, with reduced investment in new office, retail and hospitality buildings – particularly for speculative developments. The underlying drivers for works in residential and infrastructure construction would remain in place, but there is a downside risk given the potential for project costs to spike in the short term and contractors failing to deliver projects within budget,’ GlobalData’s lead economist Danny Richards said.

    GlobalData also explains that indicators have shown a slowing of growth in recent months signalling that there could a decline in quarters to come. Performance remains divided however.

    ‘Overall infrastructure, for example, had expanded by 12.1% year-on-year in the first seven months of 2019, supported mainly by large-scale investments in public infrastructure projects through government flagship programs such as the National Infrastructure Plan. Total residential construction was up by 5.7% during this same period, but much of this growth was driven by public housing (up by 22.5%), with private housing projects posting growth of just 2.7%.’

    The uncertainty of a No-Deal and the concerns from investors, there is a prospect of recession.

    New construction in both the industrial and commercial sectors is said to be down 5.7% and 5.3% respectively in the first six months of the year.

    ‘Growth in these sectors is expected to remain negative until a clearer understanding emerges on the conditions under which the UK will leave the EU and how this is likely to affect trade and investment. The longer the current state of uncertainty persists, the greater the risk of existing projects in the pipeline being put on hold or cancelled,’ GlobalData’s lead economist Danny Richards added.

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    The UK is expected to leave the European Union on October 31st with or without a deal agreed with Brussels.

    However, a bill passed in September instructs the Prime Minister to call for an extension of the Brexit process if MPs do not support a new deal negotiated with the EU and presented to them on the 19th October.

    The Prime Minister Boris Johnson also faces continued legal challenges which may force him to call for the extension.