Coronavirus: Unprecedented slump in construction sector eases as sites reopen

Edmund Heaphy
Finance and news reporter
London skyline with silhouettes of construction cranes in the foreground. The sector has been severely dented by the coronavirus pandemic. (Getty)

The sustained downturn in activity in the UK’s construction sector due to the coronavirus pandemic eased last month, as firms gradually reopened construction sites across the country.

A closely watched survey by IHS Markit found that the sector’s purchasing managers’ index reading came in at 28.9 in May, the second-lowest since the financial crisis.

The figure, up from 8.2 in April, nonetheless indicates that the rate of collapse within the sector is slowing.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

READ MORE: UK manufacturing 'mired in its deepest downturn in recent memory'

“A gradual restart of work on site helped to alleviate the downturn in total UK construction output during May, but the latest survey highlighted that ongoing business closures and disruptions across the supply chain held back the extent of recovery,” said Tim Moore, economics director at IHS Markit.

Some 64% of the firms surveyed reported a drop in construction activity during May, while only 21% signalled an expansion, IHS Markit said.

Most of the growth was related to the “limited” reopening of construction sites following widespread shutdowns in April.

UK construction firms reported a “rapid drop” in new orders and said there was a sharp decline in demand for new construction projects.

There were less sharp cuts to staffing numbers in May, with many firms noting that the number of redundancies would have been far higher without the government’s wage-subsidy scheme.

The survey also indicated that widespread supply chain disruptions continued last month, with lead times for projects and deliveries of material lengthening at a rapid pace.

Construction companies “remain downbeat” about the year ahead, with sentiment holding close to April’s low, IHS Markit said.

"With construction firms anticipating a reduced pipeline of work and fewer tender opportunities, business expectations for the next 12 months remained negative in May,” said Moore.

“Since the start of the lockdown period in March, business sentiment has remained more downbeat than at any time since October 2008.”

READ MORE: UK economy buckles under 'deep cuts to corporate spending'

Residential work was the most resilient sub-sector, followed by civil engineering. Commercial building, the worst-performing sub-sector, also saw a slower pace of decline during the month.

Noting that the construction sector faces a number of obstacles, such as social distancing requirements and the eventual end of the wage-subsidy scheme, Duncan Brock of the Chartered Institute of Procurement & Supply said it would take “a long time for the sector to build strength from the ruins of COVID-19.”

The figures come after similarly bleak readings from the manufacturing and services sectors.

The UK manufacturing sector remained mired in a deep downturn in May, as the pandemic continued to dent output, new orders, and employment.

Firms in the services sector, meanwhile, have been hit hard by declining work and are slashing jobs rapidly amid sharp cuts to corporate spending.