UK construction sector decline slows but industry remains gloomy
The rapid decline in the UK construction sector slowed somewhat in May, but firms remained deeply pessimistic as the industry was battered by coronavirus.
The IHS Markit/Cips construction purchasing managers’ index (PMI) rose to 28.9 in May from a record low of 8.2 in April.
Yet a score of 50 indicates that the sector contracted month on month. And the reading was the second-worst since the financial crisis in 2009.
It came after the UK government eased some restrictions on the construction sector in May. Prime Minister Boris Johnson encouraged sites to get back to work where it was safe to do so.
Despite the changes to the lockdown, 64 per cent of respondents to data firm IHS Markit’s survey reported a drop in construction activity in May. Only 21 per cent signalled an expansion, mostly attributing it to the limited return to work.
However, some economists have suggested that April was really the nadir for the UK economy. “Many respondents appear to be answering the alternate question of ‘how is activity compared to normal?’” said Andrew Wishart, UK economist at Capital Economics.
Nonetheless, the construction PMI makes for grim reading and reflects the deepest economic downturn since at least the 1930s. It showed a rapid drop in new orders for construction firms.
Companies slashed jobs once again, although cuts to staffing numbers moderated from April’s unprecedented decline.
Construction sector worries about what lies ahead
Looking ahead, construction companies were still very downbeat about their prospects for the next 12 months. Sentiment levels held close to April’s low. However, firms said they were helped by the government’s furlough scheme.
“As the sector staggers back to work, and builders put their heads above the parapet, they face a number of obstacles,” said Duncan Brock, group director at Cips, the Chartered Institute of Procurement & Supply.
“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.”