Construction faces 'grim time ahead' as work declines at steepest rate for almost eleven years

There were rapid falls in construction output and new work in March as emergency public health measures to help halt the spread of Covid-19 led to sites closing across the UK.

Construction output dropped to 39.3 in March from 52.6 in February, signalling the sharpest fall  since April 2009, according to the IHS Markit/CIPS UK Construction Total Activity Index.

Civil engineering activity (index at 34.4) and commercial building work (index at 35.7) saw the steepest rates of decline.

Residential activity decreased at a comparatively modest pace in the same time period (index at 46.6). 

Survey respondents from over 150 construction companies overwhelmingly attributed reduced activity to the impact of the Covid-19 pandemic.

Tim Moore, economics director at IHS Markit, which compiled the survey, said that the data provided an “early snapshot” of the effect of Covid-19 on UK construction output.

"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.”

In March, lower workloads and business closures resulted in a marked reduction in staffing numbers across the construction sector — said to be the steepest pace of job shedding since September 2010.

"With no upturn in sight . . . the sector is stuck in quicksand and sinking further,” commented Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

Construction companies also recorded severe supply chain pressures in March as the impact of the outbreak resulted in reduced capacity and shortages of stock among vendors. 

"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," Tim added.

Survey respondents are more pessimistic about the year ahead than at any time since October 2008.

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, stated that, while the data was “bleak” there were two “modest silver linings”.

“The first is that, as an industry, we’ve been here before,” he stated.

“Few sectors have more bitter, regular experience of enduring sharp falls in confidence than construction.

“…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.”

Gareth highlighted that there was a grey area about how far the UK’s lockdown rules apply to construction.

Despite the announcement of a nationwide lockdown earlier in March, construction sites have been given the green light to continue work, as long as social distancing measures are followed.  

Gareth added that, overall, the 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.”

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