Housebuilding work continued steep decline in May

Housebuilding work continued to decline in May, according to the latest purchasing data, despite a raft of housebuilders announcing plans to reopen construction sites.

The latest monthly purchasing managers’ index from IHS Markit and CIPS showed a significant recovery from the low experienced during April, registering a figure of 31 for residential construction, which was the best performing sector.

However, with any figure below 50 representing a decline in orders, the score still means widespread falls in orders are being experienced, with the overall figure for construction of 29 by far the worst, aside from the April figure, since the depths of the global financial crisis in 2009.

The index recorded a score of 8 in April, by a significant distance the lowest on record.

According to the survey, the softer pace of decline than the record slump seen in the previous month, largely reflected a gradual reopening of construction sites as lockdown measures were eased in England. 

Around 64% of those surveyed reported a drop in construction activity during May, while only 21% signalled an expansion.

Construction companies recording a drop in activity during May said 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 were to blame.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: "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 PMI 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." 

May data also indicated a rapid drop in new orders received by UK construction companies, which was almost exclusively attributed to covid-19 pandemic.

Moore said: "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"

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.

Jan Crosby, UK head of infrastructure, building and construction at KPMG, said: “Housing sales are restarting and, for the most part, are experiencing a continuation of the pent up demand that existed pre-lock down. 

“Construction remains a relatively fragile sector though demand is varying for larger-scale infrastructure projects and office buildings – the latter having dropped off for now."