Construction activity falls at steepest rate since 2009

General

Construction output fell at the sharpest rate since April 2009 in March due to COVID-19.

The seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index dropped to 39.3 in March from 52.6 in February. Below 50 shows a decline in the index.

Residential activity was at 46.6, with commercial building work standing at 35.7.

Tim Moore, economics director at IHS Markit, 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.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, said: “Bleak though it is, there are two modest silver linings to the construction industry’s PMI data.

“The first is that as an industry we’ve been here before. Few sectors have more bitter, regular experience of enduring sharp falls in confidence than construction.

“Battle scars in of themselves will provide no protection from a simultaneous drop in both demand and supply. But the fact that the declines seen during the 2008 financial crisis were worse offers some comfort. Construction weathered that storm successfully, and will do so again.

“Then there is the grey area about how far the UK’s lockdown rules apply to construction.

“With the government allowing work to continue on ‘essential’ projects, the shutdown has not been total. There is plenty of debate about what constitutes ‘essential’ of course, but a proportion of building sites remain open, albeit with workers operating under strict restrictions.

“Housebuilders have kept surprisingly busy, with activity levels contracting rather than collapsing. Of course job losses have been painful, and as a sector with many self-employed contractors, construction will put the government’s furlough scheme to a stern test.

“Yet overall this report could have been much worse. As an industry which typically requires large numbers of people to work together on-site, construction doesn’t easily lend itself to remote working.

“But with some sites remaining open and the industry accustomed to riding out extreme volatility, construction faces a grim time ahead – but it has at least got past experience to draw upon.”

This post has originally been featured in Property Wire.