A key measure of construction activity has turned negative for the first time in eight years following the UK’s move into lockdown.
The Royal Institution of Chartered Surveyors’ construction and infrastructure market survey shows a sharp fall in workloads with a net balance of 21 per cent of respondents reporting a decline between March 27 and April 7 – the latter period in which polling was carried out, which corresponded to strict social distancing measures coming into force.
The majority of respondents envisage a fall in workloads and profit margins as well as a decline in new hiring in the coming year.
This contrasts with earlier responses between March 5 and 26, in which time the sector was still showing resilience with a net balance of 16 per cent of respondents reporting a pick-up in workloads.
Bringing the two sets of figures together, a net balance of 3 per cent of respondents reported a decline in workloads for Q1 2020, compared to a positive net balance of 12 per cent of respondents reporting an increase in workloads during the previous quarter.
RICS reports that momentum slipped across all market segments apart from infrastructure, where a net balance of 11 per cent of contributors reported an increase in activity.
Private and public housing workloads stagnated in Q1, while activity fell in the private commercial and industrial sectors.
Both new work and repair and maintenance were broadly flat and there was no change in business enquiries for new projects and contracts in the past three months as a whole, although they fell significantly towards the end of the survey period.
Looking ahead, average twelve-month expectations point to a drop in output over the coming year, with a net balance of 40 per cent of those surveyed after March 27 forecasting a decline.
The RICS market confidence indicator, a composite measure of workloads, employment and profit margins expectations over the coming twelve months, fell sharply to -23 per cent from +35 per cent in Q4.
Among those surveyed post March 27, this indicator fell to -46 per cent signalling an even sharper downturn.
RICS chief economist Simon Rubinsohn says: “It is hardly a surprise that sentiment in the construction sector fell particularly sharply following the imposition of the lockdown.
“More ominously, the forward looking metrics have also softened materially, suggesting that it will not simply be a case of returning to where the industry was prior to the onset of covid-19 as the government begins to ease the lockdown.
“Partly this reflects uncertainty about the likely state of the economy at this point and how this will impact on development, but it is also indicative of the challenge the sector is currently under as it attempts to access government funding to keep heads above water.”
