Covid sees steep declines for construction

The latest statistics released by IHS Markit / CIPS, show construction has been hit hard  by the Covid-19 outbreak, with figures showing the fastest downturn in UK construction output for almost eleven years.

As emergency public health measures have been put in place to halt the spread of coronavirus 2019, this has led to stoppages of work on site and a slump in new orders – seeing the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index dropping to 39.3 in March from 52.6 in February.

The Index indicates the steepest fall in construction output since April 2009, although respondents are careful to note this is due to the pandemic response rather than a decline in industry, which was at a healthy 52.6 – above the 50.0 no change marker.

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.

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 the COVID-19 outbreak.

Construction companies 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.

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, which was almost exclusively attributed to the economic impact of the COVID-19 pandemic.

Tim Moore, Economics Director at IHS Markit, which compiles the survey commented: “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.”

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