April fall in housebuilding work the ‘fastest ever’

The fastest ever fall in housebuilding work was recorded between March and April, according to the latest construction purchasing managers index.

The April PMI survey published this morning found the biggest ever proportion of respondents reported declines in workload from March in the survey’s 23-year history.

The news comes after much of the industry shut down from late April after the government announced lockdown measures designed to combat the coronavirus crisis.

The survey compiled by IHS Markit for the Chartered Institute of Purchasing and Supply (CIPS), gave an index score to the housebuilding industry of just 7.3, where zero means every single firm is experiencing a decline, and 50 represents no change.

This score made housebuilding the worst performing sector within construction, with the commercial construction sector producing a score of 7.7 and the civil engineering sector a score of 14.6. However, the scores for each sector represented record industry lows.

Overall, the construction index fell from a score of 39.3 in March recorded as the pandemic was starting to take hold to 8.2, having never previously fallen below 27. The lowest ever index score, of 27.8, was recorded in the depths of the financial crisis in February 2009.

The PMI statement said the overall construction index score resulted from a record 86% of respondents saying they were seeing a decline in workloads. Just three per cent of respondents reported an expansion in workload.

The survey also found that new business volumes fell at a rapid pace, with the downturn by far the steepest recorded in more than two decades of data collection. Construction companies saw contract awards suspended due to business closures among clients, and uncertainty about the duration of stoppages on site and feasibility of starting new projects.

Last month Housing Today revealed that around three quarters of housing sites had been put on hold in response to the lockdown. 

The figures make construction the worst performing sector in the UK economy covered by CIPS’ PMI indices, with the figures lower than for both manufacturing and services.

However, in the last two weeks a number of firms have started to return to site having introduced “social distancing” measures they say can keep building sites safe. Tim Moore, economics director at IHS Markit, said: “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.

He added that April looked set to be followed by a gradual reopening of sites, but that the prospect of severe disruption across the supply chain will continue over the longer-term. “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,” he said.

Duncan Brock, group director at CIPS, said the survey was “more worrying news for fragile construction businesses”, and that the longer-lasting impacts of the shut-down would “knock the sector back another decade.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, said that in a week of bleak PMI reports, the construction industry’s data stood out as “especially cataclysmic”.

Kevin Cammack, analyst at Cenkos, described the score, worse than the forecast of around 20, as “no surprise”. He said: “I have no doubt this will mark a nadir but it could be a while before we see the index above 50 (indicating growth) again.”