UK construction output plummets in April as full effect of lockdown measures are realised

12 June 2020 (Last Updated June 12th, 2020 16:44)
UK construction output plummets in April as full effect of lockdown measures are realised

UK construction output fell dramatically in April, falling by 40% month on-month and by 44% year-on-year, according to data released by the Office for National Statistics. The fall in construction output was driven by a 41% decrease in new works and a 38% decrease in repair and maintenance. The data for April is the sharpest fall in monthly output data since the series began in 2010, according to the ONS. The fall in construction output in April reflects the peak of the virus outbreak in the UK, which subsequently forced a large number of construction firms to temporarily halt works.

The largest falls came in the public housing sector, which fell by 67%, private housing fell by 59% and private housing repair, maintenance and improvements fell by 54% compared to March 2020. The lowest falls in construction output came in public non housing works, primarily in health and education, which fell only by 14%, this was likely due to new hospitals and health centres being built during the Covid-19 crisis, while schools also likely as maintenance works took place while students were at home. Infrastructure also fared better than other construction sectors, falling by 20.3% in April compared to March. One explanation for the infrastructure outperforming the sector as a whole is because works in this sector are more capital intensive compared to housing works, which makes it easier to social distance, furthermore infrastructure sites tend to be larger. The government’s willingness for works to continue also likely played a role, with the first phase of HS2 being approved in April.

The ONS also captured data on the number of firms using the government’s Coronavirus Job Retention Scheme, the survey data indicates that the construction industry was the second most likely to apply for the initiative behind the accommodation and food service industry. The survey suggests that the construction sector is among the worst affected sectors in the economy.

As the economic outlook worsens and unemployment rises, the UK economy is set to contract by 8.8% in 2020 according to market consensus, a sharp downgrade from the 1.3% growth predicted in February. The virus outbreak, coupled with weak economic conditions, have severely disrupted growth in the construction sector as illustrated by the April construction output data. GlobalData has revised downwards the forecast for construction industry growth in 2020 to -7%, a further downgrade of the forecast is likely given the sharp fall April. However, with the reopening of sites in May and June there will be strong monthly sequential growth in the next few months, given the historically low base in April.