Record low for CIPS construction index
Author: ross sturley cimcig
Around 86% of the CIPS Purchasing Managers Index survey panel have reported a drop in activity since March, marking a record low for the construction industry, with rapid falls in all main areas of activity.
April data indicated by far the fastest decline in UK construction output since the survey began 23 years ago. The vast majority of survey respondents (86%) reported a reduction in business activity since March, reflecting widespread site closures and shutdowns across the supply chain in response to the public health emergency. The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index fell from 39.3 in March to 8.2 in April, to signal a rapid downturn in overall construction output.
Moreover, the latest reading was the lowest since data were first collected in April 1997. The previous record low was 27.8 in February 2009. All three main categories of construction work experienced a survey-record fall during April, with declines in house building (7.3) and commercial activity (7.7) exceeding that for civil engineering (14.6). Lower volumes of construction output were almost exclusively attributed to business closures in April, with survey respondents often commenting on complete stoppages of activity on site due to the coronavirus disease 2019 (COVID-19) pandemic. April data also highlighted a severe impact on construction supply chains, with closures at builders merchants and stoppages of manufacturing production leading to widespread supply shortages.
The latest lengthening of average lead times for the delivery of construction products and materials was by far the steepest since the survey began in April 1997. Around three-quarters of the survey panel reported longer delivery times from suppliers during April, with a lack of availability for safety products also frequently reported by construction companies. New business volumes fell at a rapid pace in April, with the downturn by far the steepest recorded in more than two decades of data collection. Construction companies commented on the suspension of contract awards due to business closures among clients, as well as uncertainty about the duration of stoppages on site and feasibility of starting new projects.
Meanwhile, construction firms reported that staffing had dropped sharply in April, with employees often placed on furlough until work on site could recommence with social distancing measures. The latest survey also indicated by far the steepest decline in sub-contractor usage in the survey history. Business expectations for the year ahead dropped slightly since March and equalled the survey-record low seen in October 2008. Construction firms widely noted concerns beyond simply reopening sites, including cash flow difficulties across the supply chain, rising costs and severely reduced productivity.
Tim Moore, Economics Director at IHS Markit, which compiles the survey: “The rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors. Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the COVID-19 pandemic.
"Around 86% of survey respondents reported a fall in business activity since March, while only 3% signalled an expansion. House building and commercial work were unsurprisingly the hardest hit, but civil engineering activity also fell at by far the fastest pace since the survey began in April 1997.
"A drop in construction activity of historic proportions in April looks set to be followed by a gradual reopening of sites in the coming weeks, subject to strict reviews of safety measures.
"However, the prospect of severe disruption across the supply chain will continue over the longer-term and widespread use of the government job retention scheme has been needed to cushion the impact on employment. Looking ahead, construction companies widely commented on worries about cash flow, rising operating costs and severely reduced productivity, as well as a slump in demand for new construction projects."