Growth in UK construction output ‘bulldozed’ in March amid COVID-19

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construction output,
© Mahmut Degirmi

Any hope of growth in UK construction output ‘bulldozed’ in March, as coronavirus leads to stoppages of work on-site and a slump in new orders, according to the latest construction PMI

March PMI 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 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 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 housebuilding due to construction sites closing down.

New work received by construction companies fell at a sharp rate in March, with the downturn in order books the fastest recorded by the survey since August 2019. Survey respondents commented on a combination of weaker demand and concerns among clients about the feasibility of starting new projects during COVID-19.

Lower workloads and business closures resulted in a marked reduction in staffing numbers across the construction sector during March. The latest survey indicated the steepest pace of job shedding since September 2010.

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

Input buying dropped at the fastest rate for six months.

Meanwhile, latest data indicated a slump in business expectations across the UK construction sector. Survey respondents are more pessimistic about the year ahead outlook than at any time since October 2008.

Construction sector yet to ‘hit rock bottom’

Duncan Brock, group director at the Chartered Institute of Procurement & Supply: “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 insight, 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.”

Kate Kirby, construction & infrastructure partner at DWF, commented: “The construction industry is naturally cyclical but the COVID-19 pandemic has taken it by surprise after things had started to improve over the recent months.

“For the near future, the market is likely to become more contentious. Contractors will be alive to putting a line in the sand in relation to potential extension of time claims. Employers and contractors may seek to terminate contracts with a view to re-pricing jobs when on the other side of this.

“They may also question whether the UK will need to look to a more localised supply chain for construction materials and workforce in the future.

“Currently it is very difficult to predict what the future will bring but there will hopefully be brighter times ahead.”

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