Buyers report steepest work drop since 2009
Construction buyers have reported the steepest decline in UK construction output in March this year for nearly 11 years, amid public health measures to halt the spread of coronavirus.
Site stoppages and a slump in new orders have led to the biggest drop in work since April 2009, following the 2008 financial crash.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index dropped to 39.3 in March from 52.6 in February (where 50.0 indicates no change).
Buyers “overwhelmingly” blamed reduced activity on the impact of the covid-19 pandemic. All three broad categories of construction work recorded a fall in output during March. Civil engineering activity (index at 34.4) saw the steepest rate of decline, followed closely by commercial building work (index at 35.7). Residential activity dropped at a comparatively modest pace in March, with the equivalent index posting 46.6. But construction firms warned that they also expected a slump in house building from stoppages on site amid increasing measures to slow the spread of covid-19.
New work also fell at a sharp rate in March, with the downturn in order books the fastest recorded by the survey since August 2019.
Jobs axed at fastest rate for 10 years
Meanwhile, jobs were shed by employers at the fastest pace since September 2010. And construction companies recorded “intense” supply chain pressures in March as the covid-19 pandemic resulted in reduced capacity and shortages of stock among vendors.
Survey respondents were more pessimistic about the year-ahead outlook than at any time since October 2008, which was almost exclusively attributed to the economic impact of the covid-19 pandemic.
Tim Moore, economics director at IHS Markit, which compiles the survey said: “March data provides an early snap-shot of the impact on UK construction output from emergency public health measures to halt the COVID-19 pandemic, with activity falling to the greatest extent since the global financial crisis.
“The closure of construction sites and lockdown measures will clearly have an even more severe impact on business activity in the coming months. Survey respondents widely commented on doubts about the feasibility of continuing with existing projects as well as starting new work.
“Construction supply chains instead are set to largely focus on the provision of essential activities such as infrastructure maintenance, safety-critical remedial work and support for public services in the weeks ahead.”
Mark Robinson, Scape Group chief executive, said: “The data gives us an early indicator of just how damaging the effects of the covid-19 pandemic will be on construction. The outbreak struck at a time when the industry was gaining real momentum, with the fastest expansion in a year recorded last month, but now it’s been stopped dead in its tracks.
“While the outbreak will only be temporary, the effects on construction will be long lasting unless clients and tier one contractors do all they can now to protect their supply chain partners. There remains a significant volume of key infrastructure, housing and commercial projects that UK plc will need more than ever after this crisis to attract investment and provide a platform for recovery.
“Only where it is safe to do so, work can and should continue. This will still rule a lot of projects while social restrictions remain in place. In a sector where cash is king, accelerating payments and settling dated debt needs to be a priority for clients to safeguard the businesses they will need again once normality begins to return.”