Report reveals record slump in UK construction

By Mike Hayes06 May 2020

IHS Markit

Construction output in the UK has declined more rapidly than at any time in the past 23 years, a new report has revealed.

In the Purchasing Managers’ Index survey (PMI), undertaken by London-based market research specialist IHS Markit/CIPS UK, 86% of construction industry respondents reported a reduction in their business since March, due to the coronavirus outbreak.

IHS Markit said the activity figures were the lowest it had seen since it first collected data in 1997.

The PMI incorporated three main categories of construction: house building, with activity down to just 7.3; commercial construction down to 7.7; and civil engineering work down to 14.6 (where a figure above 50 represents growth in activity against the previous month).

In many cases, respondents said sites had been completely closed, due to health and safety measures, shutdowns across the supply chain, or both.

Among supply chain issues, of course, was the difficulty in procuring safety products for on-site workers.

IHS Markit said the fall in volumes of new business was also faster than any it had previously measured, with uncertainty about how long the stringent anti-Covid-19 measures would be in force, and about the short-term prospects of shuttered projects restarting.

Looking ahead, IHS said expectations for the rest of the year from PMI respondents matched the record low seen in its survey of October 2008, with significant concerns from the industry about cash flow and continuing reduced productivity.

Tim Moore, economics director at IHS Markit, said, “A drop in construction activity of historic proportions in April looks set to be followed by a gradual reopening of sites in the coming weeks, subject to strict reviews of safety measures.”

Duncan Brock group director at the Chartered Institute of Procurement and Supply, said, “Only a few civil engineering and infrastructure projects were able to continue in April, but a tentative restart is expected in other areas such as house building and commercial construction in the short-term.”

He added, “As new plans from policymakers are developed over social distancing, building work may continue but not as we know it as restrictions and new safety rules are likely to make progress more difficult. For a sector still not fully recovered from the skills shortages created by the financial crisis in 2008, the vacuum of output created by the pandemic has knocked the sector back another decade.”

The Construction Products Association’s economics director, Noble Francis, also responded to the survey, saying, “House builders will also be very cautious about starting new developments given uncertain demand.

He added, “Given 86% of construction employment is in SMEs, the biggest impact will be sub-contractors and specialists suffering from record PMI declines in construction activity. SME’s will also suffer from main contractors pushing out payment terms. Even where activity is occurring, social distancing measures to ensure safety on site mean productivity has fallen 30-50% (depending on the development). This means construction activity takes longer and costs more, and so adversely impacts the margins of previously signed contracts.”

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