Construction activity hits all-time low after historic contraction, report shows

A padlock on the gates of a construction site
A padlock on the gates of a construction site - (Copyright PA Wire)
10:39am, Wed 06 May 2020
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Britain’s construction sector saw a drop in activity of “historic proportions” last month as the coronavirus pandemic forced widespread closures of sites and building suppliers, according to a report.

The closely-watched IHS Markit/CIPS UK construction purchasing managers’ index showed a reading of just 8.2 in April – down from 39.3 in March and the lowest since records began in 1997.

The previous low was 27.8, which was recorded at the height of the financial crisis.

A score above 50 means the sector is growing but anything below 50 means it is shrinking.

The PMI reading showed an even more severe decline than those for the hard-hit services and manufacturing sectors and was described by one economist as a “total collapse”.

It came as most builders shut their sites despite being allowed to continue construction work amid the Covid-19 lockdown, with many citing social distancing fears and a lack of materials as suppliers temporarily closed.

In one line - a total collapse

Samuel Tombs, at Pantheon Macroeconomics, said PMIs for the three biggest sectors of the economy so far have suggested a 13% plunge in UK gross domestic product (GDP) over the second quarter, but warned that the reading “almost certainly understates the damage”.

Mr Tombs said: “In one line – a total collapse.”

He added: “Demand for office space likely will remain extremely weak, now that firms have adapted to their employees working from home and are looking to cut costs.

“Accordingly, we doubt that construction output will return to its pre-virus high until 2022.”

It comes after eye-watering collapses in activity for services and manufacturing last month, with PMI readings of 13.4 and 32.6 respectively.

But the construction sector may be one of the first to bounce back as a number of building firms have recently announced a phased reopening of sites.

However, experts fear the ongoing shortage of raw materials and safety products may constrain activity across the sector for some time to come.

Tim Moore, economics director at survey compiler IHS Markit, said: “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.”

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