The IHS Markit/CIPS UK Construction Total Activity Index fell from 39.3 in March to 8.2 in April
Construction buyers have reported the fastest decline in activity since the IHS Markit/CIPS UK Construction Activity Index started 23 years ago.
The headline figure fell from 39.3 in March (where a score of 50 indicates no change) to just 8.2 in April. The previous record low was 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).
The lower volumes of output were almost exclusively attributed to business closures during April, with many respondents citing complete stoppages of activity on site.
The survey also highlighted a severe impact on supply chains, with closures at builders’ merchants and stoppages of manufacturing production resulting in supply shortages. The lengthening of average lead times for the delivery of construction products and materials was at its steepest level since the survey began in 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 also fell at the steepest rate 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.
Steep decline in subbie usage
In another record, the survey indicated the steepest decline in sub-contractor usage in its 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: “The rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors. Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the covid-19 pandemic.
“Around 86% of survey respondents reported a fall in business activity since March, while only 3% signalled an expansion. House building and commercial work were unsurprisingly the hardest hit, but civil engineering activity also fell at by far the fastest pace since the survey began in April 1997.
“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.”
