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| UK construction sector shrinks as 'Brexit blight' bites – business live | UK construction sector shrinks as 'Brexit blight' bites – business live |
| (35 minutes later) | |
| 11.13am BST | |
| 11:13 | |
| KPMG: Construction decline is bad news | |
| Richard Threlfall, head of infrastructure, building and construction at KPMG has a very gloomy take on today’s construction PMI: | |
| “This reading is significantly worse than expected and shows that economic uncertainty continues to have a serious impact on the construction industry. Construction is an economic bellwether, so the concern will spread well beyond the sector. | |
| “There is a clear downturn in commercial construction, which is likely to continue. This is because new orders are dropping off, hitting pipelines. Infrastructure output also appears to be in decline and contractors will be concerned about a lack of new projects. | |
| “The one relative bright spot in the data was housebuilding, but even this lost momentum and there are fears that demand will drop off if interest rates rise.” | |
| 10.54am BST | |
| 10:54 | |
| Pound falls after weak construction report | |
| The pound has dropped to its lowest level against the US dollar in over two weeks, down 0.2% at $1.325. | |
| Sterling has also shed 0.3% against the euro, to €1.128. | |
| U.K. construction PMI unexpectedly dipped below the key 50 threshold in September. Pound dropping to $1.3257 | |
| The fall in UK construction activity last month has come as a nasty shock to the City. Traders are concerned that the British economy may be weakening, in the face of Brexit worries and tensions at the heart of the UK government. | |
| Earlier today, a senior German MEP actually urged Theresa May to sack foreign secretary Boris Johnson following his comments about Brexit. | |
| Manuel Ortiz-Olave, Market Analyst at Monex Europe, says this political tension is not good for sterling. | |
| “Today UK construction sector survey data fell into negative territory for the first time in more than a year. The data comes at a terrible time considering how poorly the latest rounds of macro data have performed, and also now that a potential political crisis is brewing in the Tory party. | |
| A combination of last Friday’s downward revisions of GDP data, the increase in trade deficit and consumer debt, coupled with yesterday’s poor manufacturing survey data are now followed by construction pessimism across the board. | |
| Updated | |
| at 10.56am BST | |
| 10.34am BST | 10.34am BST |
| 10:34 | 10:34 |
| Today’s PMI report also shows that British builders are suffering from the weak pound. | Today’s PMI report also shows that British builders are suffering from the weak pound. |
| Input cost inflation hit a seven-month high in September, meaning construction firms were forced to pay more for raw materials. | Input cost inflation hit a seven-month high in September, meaning construction firms were forced to pay more for raw materials. |
| 10.12am BST | 10.12am BST |
| 10:12 | 10:12 |
| UK construction slowdown: What the experts say | UK construction slowdown: What the experts say |
| Jason Robinson of trade credit insurer Euler Hermes fears that British building companies could suffer a “domino effect” of failures in the months ahead. | Jason Robinson of trade credit insurer Euler Hermes fears that British building companies could suffer a “domino effect” of failures in the months ahead. |
| “Access to skilled labour is among the chief concerns within the construction industry. Without clarity on Brexit negotiations and in particularly EU workers’ rights, uncertainty will weigh on contractors’ pipelines because of the lack of concrete details over the future economic landscape. | “Access to skilled labour is among the chief concerns within the construction industry. Without clarity on Brexit negotiations and in particularly EU workers’ rights, uncertainty will weigh on contractors’ pipelines because of the lack of concrete details over the future economic landscape. |
| “While the performance of housebuilders has been positive in 2017, an increase in failures across construction appears unavoidable as contracts become more difficult to get over the line and tendering becomes keener. High profile profit warnings continue as legacy contracts take their toll on margins.” | “While the performance of housebuilders has been positive in 2017, an increase in failures across construction appears unavoidable as contracts become more difficult to get over the line and tendering becomes keener. High profile profit warnings continue as legacy contracts take their toll on margins.” |
| “Payment delays from large contractors could have a significant impact down the supply chain, and firms will need to be vigilant to avoid being caught in a ‘domino effect’ of failures.” | “Payment delays from large contractors could have a significant impact down the supply chain, and firms will need to be vigilant to avoid being caught in a ‘domino effect’ of failures.” |
| Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, says the government could help the building sector. | Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, says the government could help the building sector. |
| “In infrastructure, contractors are hoping for further positive news in November’s Budget following this week’s announcement of more funding for the north of England’s rail network. | “In infrastructure, contractors are hoping for further positive news in November’s Budget following this week’s announcement of more funding for the north of England’s rail network. |
| Despite uncertainty, the UK is still on the whole viewed by overseas funders as a good place in which to invest their capital. | Despite uncertainty, the UK is still on the whole viewed by overseas funders as a good place in which to invest their capital. |
| Hamish Muress, currency analyst at OFX, agrees that Brexit is hurting builders: | Hamish Muress, currency analyst at OFX, agrees that Brexit is hurting builders: |
| “This contraction in the construction sector wasn’t welcomed by the market, and certainly won’t be welcomed by the Brexit negotiating team and those at the Conservative Party conference. | “This contraction in the construction sector wasn’t welcomed by the market, and certainly won’t be welcomed by the Brexit negotiating team and those at the Conservative Party conference. |
| Brexit uncertainty has returned to the fore and is back to weighing down on sterling, as a weak pound increases the cost of imported materials. | Brexit uncertainty has returned to the fore and is back to weighing down on sterling, as a weak pound increases the cost of imported materials. |
| 10.01am BST | 10.01am BST |
| 10:01 | 10:01 |
| The fall in commercial construction activity last month suggests companies are stopping investing in new shops, offices and factories. | The fall in commercial construction activity last month suggests companies are stopping investing in new shops, offices and factories. |
| That’s a worrying sign for economic growth, says Chris Williamson of Markit. | That’s a worrying sign for economic growth, says Chris Williamson of Markit. |
| Particularly worrying downturn in commercial construction #PMI, points to falling UK business investment in offices, shops, factories etc pic.twitter.com/7RyZ3cWiC6 | Particularly worrying downturn in commercial construction #PMI, points to falling UK business investment in offices, shops, factories etc pic.twitter.com/7RyZ3cWiC6 |
| 9.48am BST | 9.48am BST |
| 09:48 | 09:48 |
| CIPS: Brexit blight is hitting the economy | CIPS: Brexit blight is hitting the economy |
| The tumble in the UK construction PMI last month shows that anxiety over Britain’s exit from the EU is hitting the economy. | The tumble in the UK construction PMI last month shows that anxiety over Britain’s exit from the EU is hitting the economy. |
| So argues Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply. | So argues Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply. |
| Brock said: | Brock said: |
| “A dismal picture of construction emerged this month as the sector showed signs of worsening business conditions across the board. With the biggest contraction in overall activity since July 2016, and a drop in new orders, optimism was in short supply. | “A dismal picture of construction emerged this month as the sector showed signs of worsening business conditions across the board. With the biggest contraction in overall activity since July 2016, and a drop in new orders, optimism was in short supply. |
| “Respondents pointed to obstructive economic conditions and the Brexit blight of uncertainty, freezing clients into indecision over new projects. Even housing, the stalwart of the construction sector stuttered with a dwindling performance, but civil engineering was the biggest victim falling to its weakest level for four and a half years. | “Respondents pointed to obstructive economic conditions and the Brexit blight of uncertainty, freezing clients into indecision over new projects. Even housing, the stalwart of the construction sector stuttered with a dwindling performance, but civil engineering was the biggest victim falling to its weakest level for four and a half years. |
| 9.47am BST | 9.47am BST |
| 09:47 | 09:47 |
| Housebuilding slows as 'fragile confidence' bites | Housebuilding slows as 'fragile confidence' bites |
| UK housebuilding growth slowed to a six-month low, while civil engineering and construction both shrank in September. | UK housebuilding growth slowed to a six-month low, while civil engineering and construction both shrank in September. |
| Tim Moore of Markit, who produced today’s report, explains why activity hit a 14-month low of 48.1 last month: | Tim Moore of Markit, who produced today’s report, explains why activity hit a 14-month low of 48.1 last month: |
| Commercial development has been the worst performing category in recent months. Construction firms attributed falling volumes of commercial work to subdued business investment and reduced risk appetite among clients, linked to heightened economic and political uncertainty. | Commercial development has been the worst performing category in recent months. Construction firms attributed falling volumes of commercial work to subdued business investment and reduced risk appetite among clients, linked to heightened economic and political uncertainty. |
| “Civil engineering work decreased at its fastest pace since April 2013, which prompted concerns from survey respondents about a near-term lack of new infrastructure projects. | “Civil engineering work decreased at its fastest pace since April 2013, which prompted concerns from survey respondents about a near-term lack of new infrastructure projects. |
| “House building slipped down a gear in September, which highlighted that fragile confidence has spread across all three key market segments. Some firms suggested that the loss of momentum for residential construction reflected worries about the outlook for ultra-low mortgage rates and less upbeat demand expectations.” | “House building slipped down a gear in September, which highlighted that fragile confidence has spread across all three key market segments. Some firms suggested that the loss of momentum for residential construction reflected worries about the outlook for ultra-low mortgage rates and less upbeat demand expectations.” |
| 9.35am BST | 9.35am BST |
| 09:35 | 09:35 |
| UK builders suffer surprise contraction | UK builders suffer surprise contraction |
| Breaking! Britain’s construction sector is contracting, fuelling fears that the UK economy is slowing. | Breaking! Britain’s construction sector is contracting, fuelling fears that the UK economy is slowing. |
| The Markit construction PMI, which tracks activity across the sector, fell to just 48.1 in September. That’s down from 51.1 in August. | The Markit construction PMI, which tracks activity across the sector, fell to just 48.1 in September. That’s down from 51.1 in August. |
| Crucially, it is below the 50-point mark that separates expansion from contraction. | Crucially, it is below the 50-point mark that separates expansion from contraction. |
| In other words, activity across the building sector is shrinking, for the first time in 13 months (just after the Brexit vote). | In other words, activity across the building sector is shrinking, for the first time in 13 months (just after the Brexit vote). |
| This is much worse than anyone in the City expected (economists predicted a reading of around 50.0) | This is much worse than anyone in the City expected (economists predicted a reading of around 50.0) |
| Builders interviewed by Markit say they suffered a drop in workloads due to “fragile confidence and subdued risk appetite” among clients, especially in the commercial building sector. | Builders interviewed by Markit say they suffered a drop in workloads due to “fragile confidence and subdued risk appetite” among clients, especially in the commercial building sector. |
| Brexit uncertainty appears to be a big factor. Markit says: | Brexit uncertainty appears to be a big factor. Markit says: |
| Survey respondents widely commented on a headwind from political and economic uncertainty, alongside extended lead times for budget approvals among clients | Survey respondents widely commented on a headwind from political and economic uncertainty, alongside extended lead times for budget approvals among clients |
| More to follow.... | More to follow.... |
| Updated | Updated |
| at 9.45am BST | at 9.45am BST |
| 9.12am BST | 9.12am BST |
| 09:12 | 09:12 |
| Greggs is hoping that a new ‘all day breakfast’ wrap, and a Thai chicken soup offering, will lure customers into its shops this autumn. | Greggs is hoping that a new ‘all day breakfast’ wrap, and a Thai chicken soup offering, will lure customers into its shops this autumn. |
| The bakers chain reports that its breakfast sales have “grown strongly” in the last three months, helping total takings to rise by 8.6%. | The bakers chain reports that its breakfast sales have “grown strongly” in the last three months, helping total takings to rise by 8.6%. |
| Gregs is also cracking on with its expansion programme; planning to open up to 150 stores this year, and close 50. It’s already opened 98 since the start of January. | Gregs is also cracking on with its expansion programme; planning to open up to 150 stores this year, and close 50. It’s already opened 98 since the start of January. |
| Greggs trading update..Sales +8.6%Lfl +5%98 new stores opened, 32 closed, 120 refutes.Looking forward to new Thai Chicken Soup | Greggs trading update..Sales +8.6%Lfl +5%98 new stores opened, 32 closed, 120 refutes.Looking forward to new Thai Chicken Soup |
| Shares have risen by 1% so far today. | Shares have risen by 1% so far today. |
| Updated | Updated |
| at 9.12am BST | at 9.12am BST |
| 8.49am BST | 8.49am BST |
| 08:49 | 08:49 |
| Shares are nudging higher in Europe, with the Stoxx 600 index up 0.1%. | Shares are nudging higher in Europe, with the Stoxx 600 index up 0.1%. |
| Spanish shares are also up slightly, following yesterday’s selloff after the Catalan referendum. | Spanish shares are also up slightly, following yesterday’s selloff after the Catalan referendum. |
| In London, the FTSE 100 is flat. Ferguson is leading the risers, though, up 3.6% after announcing a £500m share buyback alongside a sharp rise in profits. Ferguson (previously called Wolseley) has been benefitting from a tighter focus on the US housing market. | In London, the FTSE 100 is flat. Ferguson is leading the risers, though, up 3.6% after announcing a £500m share buyback alongside a sharp rise in profits. Ferguson (previously called Wolseley) has been benefitting from a tighter focus on the US housing market. |
| 8.28am BST | 8.28am BST |
| 08:28 | 08:28 |
| World stock markets hit new highs | World stock markets hit new highs |
| World stock markets have hit a new peak, following yesterday’s rally on Wall Street. | World stock markets have hit a new peak, following yesterday’s rally on Wall Street. |
| The MSCI All-Country World Share Index has nudged 488.33 points, indicating that equities have never been more expensive. | The MSCI All-Country World Share Index has nudged 488.33 points, indicating that equities have never been more expensive. |
| This rally was led by America, where the New York stock market hit fresh record highs last night. | This rally was led by America, where the New York stock market hit fresh record highs last night. |
| The Dow Jones, S&P 500 and Nasdaq indices all began October with new gains. | The Dow Jones, S&P 500 and Nasdaq indices all began October with new gains. |
| Investors were cheered by the news that US factory growth hit a 13-year high last month, indicating that the US economy is expanding at a solid pace. | Investors were cheered by the news that US factory growth hit a 13-year high last month, indicating that the US economy is expanding at a solid pace. |
| AT THE CLOSE: Dow, S&P 500, Nasdaq, and Russell post record closing highs. pic.twitter.com/vTFfff8MNK | AT THE CLOSE: Dow, S&P 500, Nasdaq, and Russell post record closing highs. pic.twitter.com/vTFfff8MNK |
| Investors are also clinging to optimism that Donald Trump might push some growth-friendly measures though, as Bruce Bittles, chief investment strategist at Baird, explained (via CNBC): | Investors are also clinging to optimism that Donald Trump might push some growth-friendly measures though, as Bruce Bittles, chief investment strategist at Baird, explained (via CNBC): |
| The economy is doing well despite the storms. | The economy is doing well despite the storms. |
| A lot of folks don’t think there will be tax reform but the market thinks there will be. If that happens, it will be a big boost to the economy.” | A lot of folks don’t think there will be tax reform but the market thinks there will be. If that happens, it will be a big boost to the economy.” |
| 8.14am BST | 8.14am BST |
| 08:14 | 08:14 |
| The agenda: UK factory healthcheck | The agenda: UK factory healthcheck |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| We’ll be taking the health of the UK building sector this morning, when Markit releases its latest Construction PMI report, for September. | We’ll be taking the health of the UK building sector this morning, when Markit releases its latest Construction PMI report, for September. |
| Britain’s builders aren’t having a great time right now, with Brexit uncertainty deterring some clients from committing to new projects. In August, the construction PMI fell to a one-year low of 51.1 (50 = stagnation). And there are fears that growth hasn’t picked up yet. | Britain’s builders aren’t having a great time right now, with Brexit uncertainty deterring some clients from committing to new projects. In August, the construction PMI fell to a one-year low of 51.1 (50 = stagnation). And there are fears that growth hasn’t picked up yet. |
| The City consensus is that September’s construction PMI dipped, to 51.0. | The City consensus is that September’s construction PMI dipped, to 51.0. |
| Anything lower than that would indicate that builders are struggling. That would be a concern, after Monday’s manufacturing PMI showed a factory slowdown. | Anything lower than that would indicate that builders are struggling. That would be a concern, after Monday’s manufacturing PMI showed a factory slowdown. |
| Royal Bank of Canada expect a weak construction report.... | Royal Bank of Canada expect a weak construction report.... |
| Our expectation is for a dip to 50.3 from 51.1 which would come on the back of an undershoot of expectations in the manufacturing PMI yesterday. | Our expectation is for a dip to 50.3 from 51.1 which would come on the back of an undershoot of expectations in the manufacturing PMI yesterday. |
| However, what really matters is tomorrow’s services PMI as that will give us more of a sense of where the risks lie with our 0.2% q/q growth forecast for Q3. | However, what really matters is tomorrow’s services PMI as that will give us more of a sense of where the risks lie with our 0.2% q/q growth forecast for Q3. |
| We’ll also be tracking the latest development around Monarch Airlines, following its collapse yesterday. | We’ll also be tracking the latest development around Monarch Airlines, following its collapse yesterday. |
| Uber could also be in the news; its chief executive, Dara Khosrowshahi, has flown to London for talks with the transport authority over the loss of its licence in the capital. | Uber could also be in the news; its chief executive, Dara Khosrowshahi, has flown to London for talks with the transport authority over the loss of its licence in the capital. |
| Plus, we have results from baking firm Greggs (which has posted a 5% rise in like-for-like sales this summer), and heating supply firm Ferguson (whose profits are up 25% over the last year). | Plus, we have results from baking firm Greggs (which has posted a 5% rise in like-for-like sales this summer), and heating supply firm Ferguson (whose profits are up 25% over the last year). |
| Here’s the agenda: | Here’s the agenda: |
| 9.30am BST: UK construction PMI report for September. | 9.30am BST: UK construction PMI report for September. |
| 9.30am BST: Bank of England releases the record of last month’s Financial Policy Committee meeting | 9.30am BST: Bank of England releases the record of last month’s Financial Policy Committee meeting |
| 10am BST: Eurozone producer prices figures for August. | 10am BST: Eurozone producer prices figures for August. |
| 2pm BST: IMF releases the Analytical Chapters of the October 2017 Global Financial Stability Report | 2pm BST: IMF releases the Analytical Chapters of the October 2017 Global Financial Stability Report |
| Updated | Updated |
| at 8.31am BST | at 8.31am BST |