UK market intelligence Q2 2019: Brexit winners and losers
Three years and two prime ministers on from the Brexit referendum, the UK remains in the EU. Political turbulence has transformed economic fortunes in dramatic and unexpected ways, both in Britain and across Europe.
UK growth outpaces Eurozone
They took different routes to get there, but the UK and Eurozone economies began 2019 in a surprisingly similar place.
After growing by just 1.4 percent in 2018 – its worst annual performance in six years – the UK economy grew by 0.5 percent in the first quarter of 2019.
At more than double the 0.2 percent recorded in the final three months of 2018, the UK’s Q1 GDP growth outpaced the 0.4 percent expansion clocked in both Germany and the wider Eurozone area.
Construction sector output improves but the outlook remains muted
Construction has played an important role in the UK's economic acceleration so far this year. After a miserable end to 2018 – UK construction output shrank by 0.5 percent in the final three months of the year – sector output rebounded to growth of 1.0 percent in Q1 2019.
Some observers have attributed this uptick to construction firms stockpiling materials ahead of the expected Brexit date at the end of March 2019, yet front line activity certainly remained weak throughout the quarter.
The IHS Markit/CIPS construction activity index declined at its fastest rate since March 2018, recording 48.6 in May 2019.
Consumer sentiment, as measured by the GfK Consumer Confidence Index, notched up during Q1 2019, but construction industry sentiment continued to move in the opposite direction.
Brexit deadlock hindering market conditions
35 months to the day after the UK narrowly voted to leave the EU, another election summed up the UK’s progress.
By rights, the vote in late May – to elect a new batch of UK MEPs – should never have taken place. Under the terms of Article 50, the UK had been due to leave the EU at the end of March. Yet political deadlock in Westminster has delayed the Brexit process, meaning the UK remains in the EU and ensuring the unresolved question of Brexit dominated the election
For the UK construction industry too, Brexit remains the elephant in the room, dampening investor appetite, increasing uncertainty and driving up input cost inflation – which hit a six-month high in April.
By contrast several European construction markets are booming, and conditions are diverging fast between the UK and its EU rivals.
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