06 APR 2020


The latest monthly PMI figures show the brutal effect that Covid-19 is having on the construction industry, and the report comes with a warning that the sector “has not hit rock bottom yet.”

March data pointed to the fastest downturn in UK construction output for almost eleven years as emergency public health measures to halt the spread of coronavirus led to stoppages of work on site and a slump in new orders.

The figures show rapid falls in construction output and new work in March, with construction work declining at the steepest rate since April 2009. Employment dropped at the fastest pace since September 2010, and business expectations slumped to their weakest since October 2008

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index dropped to 39.3 in March from 52.6 in February, to signal the steepest fall in construction output since April 2009. 

Survey respondents overwhelmingly attributed reduced activity to 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.

However, construction companies often commented on an expected slump in house building from stoppages on site amid increasing measures to slow the spread of COVID-19.

Construction companies also recorded intense supply chain pressures in March as the COVID-19 pandemic resulted in reduced capacity and shortages of stock among vendors.

The latest lengthening of lead-times among vendors was the steepest recorded since October 2014.

Input buying dropped at the fastest rate for six months. Average cost burdens continued to rise in March, although the rate of inflation moderated since the previous survey period amid softer demand conditions and lower commodity prices.

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."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "The battered construction sector was offered a brief respite in February with a marginal rise in output after a difficult year, but any hope of a continuation of growth was mercilessly bulldozed away in March and construction companies registered their lowest levels of  optimism since October 2008.

"As measures to contain the coronavirus COVID-19 pandemic were put in place across the UK, construction sites closed and builders lost their jobs on a frightening scale as overall activity fell to an extent not seen since April 2009. New orders were reduced to a trickle as the scale of the disease dawned on clients and lockdown severely hindered any further progress.

"With no upturn in sight, and with the fastest level of layoffs since September 2010, the sector is stuck in quicksand and sinking further. Though lower commodity prices will bring some relief for those that can source a limited number of materials amidst disrupted supply chains, this will be cold comfort without sites to work in and staff available as health concerns remain. The brutality of this impact cannot be underestimated, and the sector has not hit rock bottom yet.”

Mark Robinson, chief executive of public sector procurement specialists the Scape Group, 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.” 


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