While all evidence from other industry surveys indicate that construction sites began to reopen in May, albeit at reduced capacity due to social distancing measures, the latest monthly survey of construction purchasing managers tells a different story.
According to IHS Markit, which compiles the UK Construction Total Activity Index, there was a further slump in May, although the rate of decline was less dramatic than that seen in April just after lockdown began.
The headline seasonally adjusted HIS Markit/CIPS UK Construction Total Activity Index scored 28.9 in May, still well below the 50.0 mark at which growth begins, but much better than the record low of 8.2 scored in April.
May鈥檚 score was the second-lowest since February 2009.
Around 64% of the survey panel reported a drop in construction activity during May, compared with April, 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.
"Lots of big sites started more activity but lots of other firms saw activity and order book pipelines weaken further," explained IHS Markit chief business economist Chris Williamson.
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.
Again, going against the grain of all other evidence, residential work was the most resilient category in May according to this survey (index at 30.9), followed by civil engineering (28.6).
Other evidence, including surveys by industry groups such as Build UK have shown that the house-building sector was more affected by the lockdown than the civil engineering sector, which includes maintenance 聽and repair of essential infrastructure and projects where social distancing is more easily achieved.
May data from the purchasing managers also indicated a rapid drop in new orders received by UK construction companies, which was almost exclusively attributed to the coronavirus 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.
Supply chain disruptions were frequently reported by survey respondents in May, with lead times for construction products and materials continuing to lengthen rapidly. A number of firms said 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.
Sentiment towards prospects for the next 12 months was little improved from April's low, suggesting the UK construction is feeling no better despite the gradual return to work.
Tim Moore, economics director at IHS Markit, said: 鈥淎 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 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, business sentiment has remained more downbeat than at any time since October 2008."
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which sponsors the survey, 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."
鈥淭he first phase of the Covid-19 crisis is coming to an end, but the construction industry, and the many thousands of people it employs, are clearly still paying a heavy price.
Fraser Johns, finance director of construction contractor Beard, said of the survey findings: 鈥淣ow is the time for government and industry to work together to ensure vital projects can continue. Beard has kept more than 90 per cent of its sites operational during the crisis by adapting our ways of working on site, and have ensured we continue to meet commitments to suppliers in these exceptional circumstances.
鈥�Health and safety remain paramount but construction is an important driver of the economy as a whole, and it is in everybody鈥檚 interests that it operates at or near full capacity to safeguard jobs and ensure that vital infrastructure is in place to power a wider recovery.鈥�
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