The construction sector has begun the long road to recovery, but industry leaders have recognised the latest PMI figures show that “we’re still a long way from any kind of normality.”

The possibility of a second wave of infections and the impact a continued recession will have on the sector were all highlighted as UK construction companies indicated a sustained downturn in business activity during May. 

Fears were expressed despite the latest IHS Markit/CIPS UK survey highlighting a softer pace of decline than the record slump seen in April, largely reflecting a gradual reopening of construction sites as lockdown measures were eased in England.

At 28.9 in May, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index picked up from 8.2 in April, but was the second-lowest since February 2009. Any figure below 50.0 indicates an overall decline in output.

Around 64% of the survey panel reported a drop in construction activity during May, 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.

Residential work was the most resilient category in May (index at 30.9), followed by civil engineering (28.6). Commercial building also fell at a slower pace during the latest survey period, but was the worst performing broad area of construction (26.2).

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

Mirroring the trend for workloads, latest data indicated that cuts to staffing numbers moderated since April. However, there were again widespread reports that redundancies would have been far more severe without the use of the government’s jobs retention scheme.

Supply chain disruptions were frequently reported by survey respondents in May, with lead times for construction products and materials continuing to lengthen at a rapid pace. 

Looking ahead, construction companies remain downbeat about their prospects for the next 12 months, with sentiment holding close to April's low. 

Hannah Vickers, chief executive of the Association for Consultancy and Engineering (ACE), said: “The figures show a slight bounce as more construction sites were able to increase activity in April, but we’re still a long way from any kind of normality. 

“Hidden in the numbers is a deterioration in the pipeline of early stage development and design work, and while we await the government’s response to the Construction Leadership Council’s Roadmap to Recovery - which was published this week - we need good news on investments in development work to ensure the wider construction sector is supported over the coming months and years.”

Tim Moore, economics director at IHS Markit, which compiles the survey, said: “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, said: "As the sector staggers back to work 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."

Max Jones, director in Lloyds Bank Commercial Banking’s infrastructure team, claimed the sector was raring to go again and that large infrastructure projects like HS2 will help reboot activity, but said the industry was also mindful of the possibility of a second wave of infections and the impact a recession will have on the sector.

“While construction has been among the sectors hardest hit by the coronavirus pandemic, it’s chomping at the bit to restart and will be instrumental in the UK’s recovery,” said Jones. “Having said that, it’s far from plain sailing. Adjusting to social distancing on sites and the resultant dip in productivity coupled with the risk of failures in the supply chain make it a complex picture.

“The government’s furlough and loan schemes have been in high demand and these have helped with short term liquidity. They’ve also bolstered confidence both in helping mitigate risks around supply chain failures and in providing added peace of mind, even if some haven’t yet needed to draw down on the facilities. Longer term, maintaining working capital headroom will be a focus as the possibility of a second wave of coronavirus, as well as recession, weighs on minds.”

Jan Crosby, UK head of infrastructure, building and construction at KPMG, said: “While May's reading still paints a bleak picture, it's a welcome shift from April's all-time low. As with many predictions at the moment it’s difficult for firms to assess what the new norm will look like and to calculate what cuts to make. Encouragingly, many firms have used the Covid-19 pause as a time to re-assess strategy and enhance their offering and systems.”

Kate Kirby, construction & infrastructure partner at global legal business, DWF, said: “In a post–pandemic world, there will still be a requirement for more homes, urban regeneration, improved infrastructure, improved offices, retail space and more distribution facilities. We all know from past downturns that a robust construction sector will emerge but how and when, we just do not know.”