The Construction Products Association’s Economics Director, Noble Francis, has responded to the latest IHS Markit/CIPS UK Construction PMI released on 6 May 2020.
Noble Francis said: “As expected, the IHS Markit/CIPS UK Construction PMI in April had its steepest fall on record, surpassing the April 2009 nadir. The house building, commercial and civil engineering (infrastructure) sectors all endured their sharpest falls on record.
“House building was the worst affected sector given most house builders shut down after the lockdown was announced on 23 March. Most major house builders announced at the end of April they would gradually restart on site in May, so April’s house building PMI will be the nadir. Even with this rise in activity in May, productivity will be down by approximately 30-50% (depending on the development) as a result of the social distancing restrictions. House builders will also be very cautious about starting new developments given uncertain demand.
“The PMI for commercial fell at record pace in April as sites shutdown after lockdown. Main (non-residential) contractors initially announced in April that they would be furloughing 40% of their workforce on average. The indications are that some commercial sites have now restarted, although this is only the case where contractors are able to adhere to safe site operating procedures and where a client wishes to continue on long-term projects.
“The least affected sector in the IHS Markit/CIPS UK Construction PMI in April was civil engineering (infrastructure), albeit it still fell to record low. Whilst many sites closed in April, there was a partial offset due to a rise in roads repairs & improvements.
“Overall, our own analysis shows around 60% of construction output in Great Britain has been lost during the current social distancing restrictions (although this is 85% in Scotland where there is different guidance on what construction is allowed to occur).
“The loss of construction activity during the social distancing restrictions breaks down as 85% of house building, 60% of non-residential new build, 60% of repairs, maintenance and improvements (the improvements part of RMI) and 20% of non-residential repairs & maintenance.
“Given 86% of construction employment is in SMEs, the biggest impact will be sub-contractors and specialists suffering from record PMI declines in construction activity. SMEs will also suffer from main contractors pushing out payment terms. Even where activity is occurring, social distancing measures to ensure safety on site mean productivity has fallen 30-50% (depending on the development). This means construction activity takes longer and costs more, and so adversely impacts the margins of previously signed contracts.”
