UK construction activity collapses in April

Construction activity in the UK collapsed last month, with lockdown measures and supply chain shutdowns causing widespread pessimism about a quick recovery for the sector.

The IHS Markit/Cips purchasing managers’ index for UK construction dropped to 8.2 in April, from 39.3 in March, the lowest level since the survey began in 1997. A reading below 50 indicates the majority of businesses reported a fall in activity compared with the previous month. 

In February, before lockdown measures were introduced, the figure was 52.6. The previous lowest reading, in February 2009, was 27.8.

Tim Moore, economics director at IHS Markit, which compiles the survey, said the drop in construction activity stood out even compared with historic falls in other sectors.

“Widespread site closures and business shutdowns across the supply chain meant that vast swaths of the construction sector halted all activity in response to the Covid-19 pandemic,” he said.

It comes as the composite PMI, which covers services and manufacturing, dropped to 13.8 and shows construction has been hit even harder than other sectors by lockdown measures.

“No sector of the economy has been spared from the slump in activity,” Thomas Pugh, UK economist at Capital Economics, said. He estimated that gross domestic product could fall by 25 per cent peak to trough, adding that other sectors not included in the PMI survey, such as retail, probably fell even further.

About 86 per cent of survey respondents said business activity had fallen since March, and 3 per cent signalled an expansion. Leaders in the sector highlighted long delivery times, a lack of product availability and workers placed on furlough. Suspended contracts and a reluctance to start new ones meant the steepest drop in new business in the history of the survey.

The sharp fall was felt across all areas of the construction sector, but housebuilding and commercial activity were hit hardest, with readings of 7.3 and 7.7 respectively. Activity in civil engineering fared slightly better, with a reading of 14.6.

“Construction was unable to continue in any significant capacity, as companies grappled with furloughed staff and building sites under complete shutdown,” Duncan Brock, group director at the Chartered Institute for Procurement and Supply, said.

“Though a fall in output was not a complete surprise, the scale and suddenness of the drop has knocked the wind out of building work in the UK.”

Construction leaders are now waiting for indications of when parts of the sector may be able to return to work, which is likely to be under stringent rules to ensure social distancing and inhibit the spread of the virus.

Samuel Tombs, chief UK economist at Pantheon Economics, said builders were “rightly pessimistic”, as shortages of raw materials and weak demand for office space would constrain future growth.

“We doubt that construction output will return to its pre-virus high until 2022,” he said.

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