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WHAT’S NEW? UK CONSTRUCTION SEC As sites gradually reopen and lockdown measures begin to loosen, UK constru


At 28.9 in May, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index picked up from 8.2 in April, but was the second-lowest since February 2009. Any figure below 50.0 indicates an overall decline in output.


Around 64% of the survey panel reported a drop in construction activity during May, while only 21% signalled an expansion. Where growth was reported, this was mostly attributed to a limited return to work on site following shutdowns in April.


”MAY DATA INDICATED A


RAPID DROP IN NEW ORDERS RECEIVED BY UK CONSTRUCTION


COMPANIES, WHICH WAS ALMOST EXCLUSIVELY ATTRIBUTED TO THE COVID-19 PANDEMIC.“


Construction companies recording a drop in activity during May often cited furloughed staff across the supply chain, as well as prolonged business closures in other parts of the economy and disruptions from social distancing measures on existing projects.


Residential work was the most resilient category in May (index at 30.9), followed by civil engineering (28.6). Commercial building also fell at a slower pace during the latest survey period, but was the worst performing broad area of construction (26.2).


May data also indicated a rapid drop in new orders received by UK construction companies, which was almost exclusively attributed to the COVID-19 pandemic. Survey respondents commented on a sharp decline in demand for new construction projects, although some noted that the reopening of sites had helped to alleviate the scale of the downturn in order books.


Mirroring the trend for workloads, latest data indicated that cuts to staffing numbers moderated since April. However, there were again widespread reports that redundancies would have been far more severe without the use of the government’s jobs retention scheme.


Supply chain disruptions were frequently reported by survey respondents in May, with lead times for construction products and materials continuing to lengthen at a rapid pace. A number of firms commented 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.


— 06 —


Looking ahead, construction companies remain downbeat about their prospects for the next 12 months, with sentiment holding close to April’s low. Recession worries and fears of postponements to new projects were commonly reported in May.


Tim Moore, Economics Director at IHS Markit, which compiles the survey, said: “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.


“It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect. However, latest PMI data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors.


“Survey respondents often commented on the cancellation of new projects and cited concerns that clients would scale back spending through the second half of 2020, especially in areas most exposed to a prolonged economic downturn.


“With construction firms anticipating a reduced pipeline of work and fewer tender opportunities, business expectations for the next 12 months remained negative in May. Since the start of the lockdown period in March,


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