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‘Brexit’ and the impact on construction in the UK

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World Cement,

There is still a great deal of uncertainty as to what the full implications of ‘Brexit’ are for the UK’s construction industry, but according to the view from Timetric’s Construction Intelligence Centre (CIC) there are major downside risks to growth, with little or no upside.

Following the victory in the June 23rd referendum for the campaign for the UK to leave the EU and the subsequent decision by the prime minister, David Cameron, to announce his resignation, the CIC has made an initial revision to its forecast for growth in the construction industry in 2016. The CIC now expects growth of 2.8%; this is down from the previous projection of 3.4%, which was based on the assumption that the result of the referendum would be in favour of remaining in the EU.

The pace of growth in the UK’s construction industry will then slow to 1.5% in 2017 (down from 4% previously), reflecting a sharp downturn in investment as the UK government embarks on the two-year process of negotiating its exit from the single market. The timing of the government’s decision to invoke Article 50 is crucial in terms of determining exactly when the UK will be formally outside of the EU, but the negative impact on investor confidence stemming from the uncertainty over how the UK economy will perform outside of the single market will weigh heavily on the construction industry during this period.

Investors will also take steps ahead of the formal exit to ensure that they are protected from any negative fall-out, and this is likely to mean a drop-off in new projects and the potential for existing projects in the pipeline to be put on hold or cancelled.

Assuming that the UK will formally be out of the EU by 2019 and a clear picture emerges on the post-EU trading environment, investment will likely pick up again as new opportunities become apparent. However, there is little prospect of a surge in new activity at this time, as the UK is not expected to be in a position of strength to strike a deal that is favourable with respect to the EU.

Adapted from press release by Joseph Green

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