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Construction activity drop slows as sites restart

4 June 2020 | By Neil Gerrard
Construction activity drop slows as sites restart

The pace of decline in construction activity eased in May as some sites returned to work, new figures from construction buyers showed.

The IHS Markit/CIPS UK Construction Total Activity Index recorded a score of 28.9 during the month – an improvement on the record slump in April when it fell to 8.2 – but still a decline in activity (a score of 50.0 represents no change).

The softer pace of decline was attributed to a gradual reopening of construction sites as lockdown measures in England eased but it was still the second-lowest level of activity since February 2009.

Around 64% of the survey panel reported a drop in construction activity during May, while only 21% signalled an expansion.

Construction companies recording a drop in activity during May often cited furloughed staff across the supply chain, as well as prolonged business closures in other parts of the economy and disruptions from social distancing measures on existing projects.

Residential work proved the most resilient category in May (index at 30.9), followed by civil engineering (28.6). Commercial building also fell at a slower pace during the latest survey period, but was the worst performing broad area of construction (26.2).

There was also a “rapid” drop in new orders received by UK construction companies, almost exclusively attributed to the coronavirus pandemic, according to the survey.

A number of firms commented that a lack of capacity for deliveries and ongoing business closures had resulted in the need to source alternative suppliers, which had also pushed up costs.

Looking ahead, construction companies remain downbeat about their prospects for the next 12 months, with sentiment holding close to April’s low.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: “A gradual restart of work on site helped to alleviate the downturn in total UK construction output during May, but the latest survey highlighted that ongoing business closures and disruptions across the supply chain held back the extent of recovery.

“It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect. However, latest PMI data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors.

“Survey respondents often commented on the cancellation of new projects and cited concerns that clients would scale back spending through the second half of 2020, especially in areas most exposed to a prolonged economic downturn.

“With construction firms anticipating a reduced pipeline of work and fewer tender opportunities, business expectations for the next 12 months remained negative in May. Since the start of the lockdown period in March, business sentiment has remained more downbeat than at any time since October 2008.”

Comments

The resilience of the construction industry in these most difficult of circumstances is praiseworthy, and I know how much attention has been devoted to enabling the workforce to work safely and deliver projects successfully.

Professor John Bale, 12 June 2020