Coronavirus: UK construction industry sees collapse of 'historic proportions'

The UK construction sector experienced its fastest decline in output ever in April, as the coronavirus pandemic prompted widespread site closures and shutdowns across the entire supply chain.

The purchasing managers’ index reading from IHS Markit’s closely watched survey of the sector came in at 8.2 in April, far worse than analyst forecasts of 22.0.

The figure, the worst since the survey began in 1997, is down from 39.3 in March. The previous survey record low was 27.8 in February 2009.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

"Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the COVID-19 pandemic,” said Tim Moore, economics director at IHS Markit, on Wednesday (6 May).

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Noting that the decline in activity was “of historic proportions,” Moore said that sites would be gradually reopened in the coming weeks, subject to strict reviews of safety measures.

All three main categories of construction work — housebuilding, commercial activity, and civil engineering — experienced their sharpest-ever declines in April, while 86% of survey respondents reported a reduction in business activity.

New business volumes fell at an unprecedented pace, with firms noting uncertainty about the duration of stoppages, issues with starting new projects, and that many businesses had suspended contract awards.

Business expectations for the year ahead thus fell to levels not previously seen since the 2008 financial crisis.

Staffing dropped sharply in April as firms placed employees on the government’s wage-subsidy scheme, while the month also saw the steepest decline in sub-contractor usage in the survey’s history.

Firms also reported issues with cashflow across the supply chain, increasing costs, and “severely reduced” productivity, IHS Markit 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,” said Duncan Brock, the group director at the Chartered Institute of Procurement & Supply.

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"More vulnerable than other sectors that make up the UK economy, construction was unable to continue in any significant capacity, as companies grappled with furloughed staff and building sites under complete shutdown,” he said.

The data from the construction sector comes after Tuesday’s reading from the services industry, which saw record declines in new work, backlogs, and employment.

Some 79% of respondents reported a drop in business activity, while IHS Markit warned that the shock from the coronavirus pandemic will be “far deeper and more widespread than anything seen in living memory.”

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