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Construction output locked-down by Covid-19 pandemic

The UK construction industry saw output drop in March to its lowest level since April 2009, according to the latest IHS Markit / CIPS construction PMI®

The March report recorded the fastest downturn in UK construction output for almost eleven years as emergency public health measures to halt the spread of coronavirus 2019 led to stoppages of work on-site and a slump in new orders.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index dropped to 39.3 in March from 52.6 in February. 50 is the key point above which things are getting better and below which they are getting worse

Survey respondents overwhelmingly attributed the reduced activity to the impact of the COVID-19 pandemic. 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, at 46.6.

New work received by construction companies saw the fastest recorded downturn in order books by the survey since August 2019, thanks to a combination of weaker demand and concerns among clients about the feasibility of starting new projects during the COVID-19 outbreak.

The latest data also indicated a slump in business expectations across the UK construction sector with survey respondents 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, 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.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply added:

“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.

“With no upturn in sight, 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.”

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