Brexit delaying major UK infra projects

BoE warns pre-Brexit ‘sweet spot’ may not last

LONDON, March 23, (RTRS): Britain’s move to leave the European Union is delaying major UK infrastructure projects from tower blocks and power stations to new roads and rail lines, construction and services company Kier Group said on Thursday.

Peers such as Capita, Mitie, Interserve and Carillion have all reported tougher trading in their UK businesses since last June’s Brexit referendum. But whereas most firms have been reluctant to give details, Kier CEO Haydn Mursell highlighted specific areas of weakness as his company reported a 4 percent rise in firsthalf profit.

Construction contracts for high-rise buildings and large office blocks in major cities, as well as public funding and approvals for large-scale road, transport works and power stations are all being delayed, he told Reuters.

“Certainly job starts have gone back on large projects,” he said, adding contracts for the HS2 high-speed rail project had been pushed back by about a year.

“I think Brexit has created a distraction for government,” he added.

However, Mursell said the market was still buoyant for repeat public sector work, as well as smaller deals with an average value of about 10 million pounds ($12.5 million)- where Kier’s regional business does a lot of its work.

Helped by this, Kier said its order book stood at about 9 billion pounds at the end of December, up from 8.7 billion at the end of June.This means the company has secured 100 percent of its forecast revenue for the year ending June 2017, and about 70 percent for the next financial year, it said.

British exporters cannot count on enjoying the “sweet spot” which was created by the Brexit vote last year, a top Bank of England official said on Thursday, underscoring the BoE’s cautious view on the outlook for the economy.

Deputy Governor said the fall in sterling -- down around 16 percent against the dollar since June’s vote to leave the European Union -- would normally provide a powerful incentive to exporting companies.

But businesses are probably already tempering their investment decisions because of uncertainty about the country’s trading prospects once it leaves the EU, Broadbent said.

Prime Minister Theresa May is poised to start the process of taking Britain out of the EU this month, kicking off two years of negotiations which will rework the country’s relationship with its largest trading partner. Uncertainty about the outcome of the negotiations has weighed on the pound.

“Either the currency market is right about the consequences of Brexit, in which case the trading relationships will become less favourable; or it’s wrong, in which case sterling is likely to recover,” he said in a speech at Imperial College.