12Th May 2020 Construction Update 780 Px External Overview

PM ‘actively encourages’ construction firms to return to work but notes limited capacity

12Th May 2020 Construction Update 780 Px External Overview2


  • The IHS Markit/CIPS UK Construction PMI plunged to 8.2 in April 2020 from 39.3 in the previous month and was well below market expectations of 22.2. Somewhat unsurprisingly, the latest reading pointed to the steepest pace of contraction since the survey started in April 1997. The previous low was 27.8, recorded during the depths of the financial crisis in 2009.
12Th May Graphs For Web Uk Pmi By Sector

According to the latest survey results:

  • Record declines in housebuilding, commercial activity and civil engineering works
  • Complete stoppages of activity on site due to the coronavirus pandemic
  • Slump in new contracts and lower output volumes as clients closed operations
  • Expectations for the year ahead edged down to a joint record low
  • Around three-quarters of the survey panel reported longer delivery times from suppliers
  • Construction companies worried about cashflow, rising operating costs and severely reduced productivity, as well as a slump in demand
  • Drop likely to be followed by a gradual reopening of sites in the coming weeks but this could be hampered by supply chain disruption

  • LinkedIn’s Workforce Confidence Index has found that those working in construction are more confident about their personal employment situations than those in any other UK industry. Measured on a scale of -100 to 100, the 2,154 polled construction workers gave a score of just 24, indicating that whilst workers are far from upbeat, they feel comparatively better off than survey respondents from other sectors in the following three core areas: job security, financial wellbeing and career outlook. Healthcare workers recorded the second highest index score (21) whilst the UK overall scored just 13.
  • Data from Barbour ABI last week showed a significant increase in the number of construction projects opening or returning to site. Over 2,200 projects are now open and back on site with a value of £82bn (or £59bn when excluding Hinkley Point). Approximately £9bn of projects opened and restarted last week. The number of delayed projects also fell last week from 4,900 to 4,600 and their value decreased from £67bn to £62bn.
  • According to Builders’ Conference, the total value of new contract awards rose by more than 50% in April 2020 to £9.7bn compared to the same month one year ago (where £6.2bn of contacts were signed). The value of contracts signed during April was also up 20% on the previous month. April was boosted by two mega-contracts - BAM Nuttall signed a £2.2bn contract with Network Rail for part of the TransPennine Route Upgrade and also a £1.5bn JV contract with Highways England for work on a 10-year smart motorways framework. Despite this, the actual number of contracts awarded in April was down by nearly a third year-on-year. Only 524 projects reached contract signing and nearly half of these were in the infrastructure sector.
12Th May Graphs For Web Total Value Of Contracts Awarded
  • Data from Builders’ Conference also revealed that tender opportunities fell in April. Between April 2019 and March 2020 the average number of monthly tender opportunities was 664. However, in April 2020 there were just 220 projects open for tender – 67% below the average and a reduction of 45% compared to the previous month. However, on a positive note, construction minister Nadhim Zahawi recently confirmed that the Government is looking to accelerate public sector construction projects as part of its coronavirus recovery plan, which will help increase the number of available tender opportunities.
  • According to the latest data from the Builders Merchants Federation (BMF), as of 7th May 20% of builders’ merchant stores were open and 61% were partially open. Only 19% of merchants remain completely closed. However, compared to the previous week an increasing number of merchants are remobilising as more contractors restart work on site. The publication of Branch Operating Guidelines by the BMF has also played a part in helping merchants to resume safe operations during COVID-19 restrictions.
12Th May Graphs For Web Status Table


  • In his address to the country on Sunday evening, Boris Johnson said that construction firms that have not reopened since the start of the lockdown are to be “actively encouraged” to return to work. At its highest point, some 65% of UK sites by value had closed down, but last week that figure was down to 37%, according to data provider Glenigan. The Prime Minister noted that social distancing needs to be maintained and that capacity would still therefore be limited. Companies will still need to assess whether they can operate while protecting their workforce, in line with the Site Operating Procedures and public health guidelines, which will vary for different nations.
  • The recently launched Highways Sector Council (HSC) wants to take advantage of the current situation and is pushing for more essential and maintenance work to take place during the lockdown. Several Highways schemes have been able to complete well ahead of schedule due to the reduced road traffic volumes. The trade body's first chair Leon Daniels said:

“It is easier to do work everywhere right now. Usually in densely populated areas, work can be disruptive, and in quieter places the speed [of vehicles] can be much higher and there is a greater need for safety measures. Now, with lower levels of traffic, there is a lower level of protection required. We’re aiming to level-up all of the highways authorities so that they’re all doing as much work as is practically possible. The general public want this work to be done now.”

  • Wilmott Dixon, which has more than 95% of its sites open for work, has taken several steps to ensure CLC Site Operating Procedures and social distancing guidelines can be adhered to. These include:
    • One-way systems on staircases to avoid paths being crossed
    • Marking out 2m spacing for safe working
    • Installation of motion activated voiceover systems to remind operatives to abide by social distancing when entering the site
    • Good supplies of hand sanitiser in meeting rooms, on desks and at all site entrances and exits
    • Daily toolbox talks to explain the latest guidance and operating procedures held in open spaces
    • Letters issued to workforce explaining their need to be outside their home in case they are questioned by law enforcement
  • A spokesman for Crossrail Ltd has confirmed that it is working with its tier 1 suppliers to develop a detailed remobilisation plan that will enable physical works at stations to get back up and running. Despite stopping the vast majority of site work on 24th March, Crossrail managed to hand over the first central London station (Custom House) to TfL last month. Talks are now underway to get other projects such as Bond Street station back on site, but Crossrail made it clear that the timing for the recommencement of activity on sites will continue to be informed by guidance from Government and Public Health England.
  • A report produced by law firm Irwin Mitchell and the Centre for Economics & Business Research has suggested that the next six weeks will be the most crucial for the survival of cash-strapped contractors. The report indicates that construction is losing more than £300m worth of business a day. Separately, Jim Davis, managing director of construction finance firm Bibby, said that many businesses in the sector have already used up their working capital so, as contractors start to call their sub-contractors back to work, the funds to pay for salaries and materials may simply not be there. He said:

“The temptation will be to go after as much work as possible as opportunities begin to open up but sub-contractors must plan prudently. If the return to work isn’t managed carefully and gradually, we could see a wave of business failures.”


  • Construction material prices appear to have reversed their 2019 downward trend. According to data from the Department for Business, Energy and Industrial Strategy (BEIS), the All Work index rose by 1.8% between December 2018 and March 2020. Since the lockdown began a substantial number of manufacturers and builders merchants cut production output and reduced operational capacity leading to shortages of certain materials on site. As the number of projects returning to site increases, the supply chain will need to ramp up capacity to avoid further lengthening of lead times and upwards price pressure on scarce materials
12Th May Graphs For Web Construction Material Price Indicies
  • Raw material prices are expected to rise over the coming weeks as lockdown restrictions are loosened globally. Copper prices, for example, surged in London on Monday, hitting an 8-week high. Demand for metals such as copper is expected to increase providing a second wave of infections is staved off.
  • Saudi Arabia intends to cut oil production by a further 1m barrels per day next month in a bid to support prices. The UAE and Kuwait also intend to announce supply reductions in June in response to significantly lower global oil consumption. BP’s new chief executive Bernard Looney recently suggested that the pandemic may have ushered in “peak oil” demand despite BP saying just last year that it expected consumption to grow over the next decade before plateauing in the 2030s.


  • April PMI data from IHS Markit/CIPS showed business activity dropping to its lowest level on record. The composite PMI - a measure of economic performance in both manufacturing and services sectors – fell to 13.8 in April from a reading of 36 in the previous month. Nearly 80% of service sector respondents reported a drop in business activity during April. Reduced activity was attributed to business closures, client shutdowns and shrinking sales as non-essential expenditure was curtailed. Respondents also noted a drop in input costs for the first time since 1996 due to lower payrolls, fuel prices and office overheads.
  • UK-US trade talks have commenced, with the first round set to last two weeks and involve around 200 officials. Both nations insist that negotiations will not be derailed by the pandemic and will be held via video conference calls. The Department for International Trade has suggested that a successful deal with Washington could eventually boost the UK economy by £15bn a year.
  • The Bank of England (BoE) has forecasted that the UK economy will contract by 30% in the first half of 2020. Its latest monetary policy report provided an indicative forecast that output would drop by 25% in Q2 2020 but would be followed by a ‘v-shaped’ recovery later on in the year. On an annual basis the bank expects GDP to contract by 14% in 2020, followed by a 15% expansion in 2021, indicating its expectations that the economy will bounce back rapidly. Also in its scenario the BoE suggested that the jobless rate could soon spike to 9% - up from 4% at present, and that inflation would dip to 0.5% in 2021 before returning to the 2% target the following year.

12Th May Graphs For Web Gdp Scenario


  • US officials confirmed that their trade pact with China remains on track despite rising tensions. Calls have been held to discuss the implementation of ‘phase one’ of a trade agreement but the US president has also threatened to “terminate” the trade deal because of scepticism over China’s willingness to honour its pledge to buy billions of dollars of American goods. Some analysts doubt that China will be able to meet its commitments given a sharp drop in consumer demand spurred on by the pandemic.
  • Chinese exports rebounded in April, rising by 8.2% year-on-year. The rise follows a 3.5% decline in March and a 15.8% plunge in the first two months of 2020. The recovery has been driven by stronger demand from south-east Asia where markets are gradually reopening as the pandemic shows signs of easing. However, trade with the EU and US, where large parts of the economy remain under lockdown, declined 6.6% and 15.9% respectively.
  • The head of the International Monetary Fund (IMF), Kristaline Georgieva, has signalled a possible downward revision to its global economic forecast. Economic data for many countries is coming in below the funds already pessimistic forecast for a 3% contraction in 2020. She said, “With no immediate medical solutions, more adverse scenarios might unfortunately materialise for some economies.” The IMF forecast a partial rebound would follow in 2021, but warned that outcomes could be far worse, depending on the course of the pandemic.

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