UK construction industry jolted by Brexit fears

MANCHESTER: Britain’s Foreign Secretary Boris Johnson delivers his speech on the third day of the Conservative Party annual conference at the Manchester Central Convention Centre in Manchester yesterday. — AFP

BRUSSELS/ LONDON: The European Union insisted yesterday that Brexit negotiations with Britain will not move on to the question of future relations until enough progress has been made on divorce issues, such as how much the country's exit bill should be. Britain desperately wants talks to move on to future trade and security arrangements but EU Commission President Jean-Claude Juncker said that more needs to be done on the withdrawal issues first.

Juncker told the European Parliament that "we have not made the sufficient progress needed" and the legislators backed him, approving a resolution underscoring the same point with a vote of 557 to 92 with 29 abstentions. It further underscored the unity of the 27 EU nations as they face off with Britain in the talks.

The EU wants London to commit to guaranteeing the rights of EU citizens already in Britain, making sure border posts do not reappear between the UK's Northern Ireland and Ireland itself and pay up for everything it had agreed to while it was a member.

Juncker said "the taxpayers in the EU 27 should not pay for the British decision" to leave, while the bloc's chief negotiator, Michel Barnier, said "serious differences remain" on how many bills the U.K. still has to settle. Estimates vary widely from 20 billion euros ($27 billion) to over three times that amount.

"Serious rifts remain, especially on the financial settlement," Barnier said. "We will not pay at 27 what has been decided at 28, it is simple as that." The parliamentary resolution called for postponing any move to widen the talks with Britain unless "a major breakthrough" takes place during the fifth round of negotiations in Brussels next week.

Observers said decisive progress was highly unlikely. Yesterday's moves further dampened hopes that the EU leaders might give the green light to an expansion in the talks at a summit on Oct 19-20. Many lawmakers were also dismissive of Britain's Conservative government, which is widely seen as insecure and bumbling.

Fighting back

Meanwhile, fearing their version of Brexit may be losing ground, right-wing members of Britain's ruling Conservatives are using their party conference to speak out-led by a media-savvy traditionalist drawing packed crowds. Foreign Secretary Boris Johnson fired the starting gun last month with an article outlining Britain's glorious future outside the EU, followed up last weekend with an interview setting out his "red lines".

Accused of disloyalty, he has largely kept a low profile at this week's conference in Manchester, northwest England, but MP Jacob Rees-Mogg-who has a similar mix of charm and wit-has stepped in.

A devout Catholic with a cut-glass accent who only wears suits and takes his nanny campaigning, Rees-Mogg has been espousing the benefits of a clean break with the EU in back-to-back fringe meetings.

"The government has been too eeyore-ish," he told an overflowing event at Manchester town hall, referring to the pessimistic character in the Winnie-the-Pooh books by A.A. Milne. He said there was "nothing to fear" from leaving the bloc without a deal, and rejected warnings of the economic damage of quitting Europe's single market.

"Brexit is a fabulous opportunity for us to prosper," he said to huge  cheers. At a crucial time in Brexit talks, when Prime Minister Theresa May has started making concessions that would ease the break with the EU, his upbeat call for Britain to stand firm has resonated.

"People need to be more optimistic. It's all about being proud of our  nation," said Lawrence Mitchell, 26, who came on his day off to hear the MP speak.

Construction industry

Meanwhile, Britain's construction companies in September reported the sharpest fall in activity since just after June 2016's Brexit vote, as clients put projects on hold due to uncertainty over the economy.

Although construction makes up just 6 percent of Britain's economy, the survey suggested it was likely to drag on official third-quarter growth figures, just as the Bank of England gets ready to raise interest rates. The IHS Markit/CIPS construction purchasing managers' index (PMI) sank to 48.1 in September from August's reading of 51.1, its lowest since July 2016 and far below all forecasts in a Reuters poll of economists.

Anything below 50 is considered a contraction. Sterling weakened by around a quarter of a cent against the dollar and fell to a day's low against the euro after the data. "The construction sector is entering its own recession," Samuel Tombs of Pantheon Macroeconomics said. "The government's shift to a more accommodating stance in Brexit talks has done little to convince builders that clients will sanction delayed projects soon."

IHS Markit said the prospect that the BoE will raise rates next month for the first time in a decade was also a factor behind slower house building. Business investment overall has grown since the Brexit vote, but many business leaders say the government is not making enough progress in Brexit talks with the European Union.

Construction - which has long lead times for projects, and relies heavily on labour from the EU - has been particularly hurt. Official data last month showed construction orders fell more than 12 percent year-on-year in the three months to June, and the PMI has shown lower orders for the past three months. Expectations for the future were at their second-lowest level since 2013, yesterday's survey also showed. -Agencies