Industry leaders are remaining calmly focussed on the future despite the Covid-19 pandemic leading to record low construction output figures.
Unsurprisingly, April data from IHS Markit / CIPS shows the fastest decline in UK construction output since their PMI survey began 23 years ago.
The vast majority of survey respondents (86%) reported a reduction in business activity since March, reflecting widespread site closures and shutdowns across the supply chain in response to the public health emergency.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index fell from 39.3 in March to 8.2 in April - the lowest reading since data was first collected in April 1997. This compares with a previous record low of 27.8 in February 2009.
All three main categories of construction work experienced a survey-record fall during April, with declines in house building (7.3) and commercial activity (7.7) exceeding that for civil engineering (14.6).
Lower volumes of construction output were almost exclusively attributed to business closures in April, with survey respondents often commenting on complete stoppages of activity on site due to the coronavirus pandemic.
April data also highlighted a severe impact on construction supply chains, with closures at builders’ merchants and stoppages of manufacturing production leading to widespread supply shortages.
The latest lengthening of average lead times for the delivery of construction products and materials was by far the steepest since the survey began in April 1997. Around three-quarters of the survey panel reported longer delivery times from suppliers during April, with a lack of availability for safety products also frequently reported by construction companies.
New business volumes fell at a rapid pace in April, with the downturn by far the steepest recorded in more than two decades of data collection. Construction companies commented on the suspension of contract awards due to business closures among clients, as well as uncertainty about the duration of stoppages on site and feasibility of starting new projects.
Meanwhile, construction firms reported that staffing had dropped sharply in April, with employees often placed on furlough until work on site could recommence with social distancing measures. The latest survey also indicated by far the steepest decline in sub-contractor usage in the survey history.
Business expectations for the year ahead dropped slightly since March and equalled the survey-record low seen in October 2008. Construction firms widely noted concerns beyond simply reopening sites, including cash flow difficulties across the supply chain, rising costs and severely reduced productivity.
Tim Moore, economics director at IHS Markit, which compiles the survey, 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. However, the prospect of severe disruption across the supply chain will continue over the longer-term and widespread use of the government job retention scheme has been needed to cushion the impact on employment.
“Looking ahead, construction companies widely commented on worries about cash flow, rising operating costs and severely reduced productivity, as well as a slump in demand for new construction projects."
Duncan Brock, group director at the Chartered Institute of 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. 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."
Hannah Vickers, chief executive of the Association for Consultancy and Engineering, said: “The figures are hardly surprising, but not withstanding the use of a cliché, there is light at the end of the tunnel. Recent news on HS2 provided a welcome psychological boost to the industry and with government focus turning to the recovery, I am sure our sector will be recognised as a key catalyst for the wider economy. I hope that this will translate to ongoing support as we work together to develop a recovery plan for the UK underpinned by a strong pipeline of projects to help the country back to growth.”
Jan Crosby, UK head of infrastructure, building and construction at KPMG, said: “Everybody knew this month’s data would be stark but it serves to underline just how far underwater parts of the sector were by the end of April.”
Mark Robinson, chief executive of public sector procurement specialists Scape Group, said: “The road ahead remains a challenging one, but there are some small rays of light at the end of this dark tunnel. A number of major contractors are re-opening their sites across the UK where it is safe to do so and the construction minister’s plans to help to accelerate live projects is another timely boost.
“Construction is a cornerstone of the UK economy and it’s encouraging to see clients and contractors already outlining plans to extend contracts in order to protect the workforce throughout the supply chain as we look towards recovery.”