Construction firms downbeat about prospects

4 June 2020

Construction firms fear a recession and postponement of new projects in the next year despite a gradual reopening of sites in May, according to the latest PMI.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index registered at 28.9 in May, picking up from 8.2 in April. 

Around 64% of the survey panel reported a drop in construction activity during May, while only 21% signalled an expansion. Growth was attributed to a limited return to work on-site following shutdowns in April due to the coronavirus outbreak. 

Construction firms said furloughed staff across the supply chain, prolonged business closures and disruptions from social distancing measures on existing projects had impacted activity in May. 

Data indicated there had been a rapid drop in new orders received by UK construction companies, and respondents commented on a sharp decline in demand for new construction projects.

Supply chain disruptions continued into May with lead times for construction products and materials continuing to lengthen at a rapid pace. A number of firms reported that a lack of capacity for deliveries and ongoing business closures had resulted in the need to source alternative suppliers, which had also pushed up costs.

Looking ahead construction companies remained downbeat about their prospects for the next 12 months. Recession worries and fears of postponements to new projects were commonly reported.

Duncan Brock, group director at the CIPS, said: “The construction sector suffered one of its worst results in May since the PMI surveys began as building work was grounded by the pandemic and lockdown measures.

“Spending was slashed as clients continued to stonewall building firms and put new projects on hold. With furloughed staff across the supply chain, companies saw their capacity leak away and the construction sector now faces the most challenging environment for generations.

“Building materials were in constrained supply as vendors gradually reopened in May, while items such as personal safety equipment were difficult to source.

“As the sector staggers back to work, and builders put their heads above the parapet, they face a number of obstacles. New safer working practices will ensure operations can continue but client confidence to place new orders is harder to predict.

“As the furlough scheme is unravelled towards the end of the summer, the floodgates preventing redundancies may also fly open and job losses will follow without a strong pipeline of work waiting in the wings. It will take a long time for the sector to build strength from the ruins of Covid-19.”

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