Fears coronavirus threatens 'Boris bounce' in UK construction

·2-min read
LONDON, UNITED KINGDOM - JANUARY 06: Boris Johnson launchs the preparationss for the build work for the extension of the Tate Modern in the old oil tank of the former power station that the Tate is situated in on January 06, 2010 in London, England. (Photo by Andrew Cowie / Barcroft Media / Getty Images)
Construction activity had picked up since the UK election giving Boris Johnson a strong majority in the parliament. (Andrew Cowie/Barcroft Media/Getty Images)

The UK construction industry has begun to recover from a nine-month slowdown, with the ‘Boris bounce’ unleashing pent-up demand for housebuilding and commercial building work.

But there are fears the coronavirus could disrupt construction supply chains and see firms put building plans on hold, threatening a fragile turnaround in fortunes.

A closely watched survey of the sector shows levels of work picking up, with more clients giving building projects the go-ahead since December’s election broke Britain’s political deadlock.

Levels of new work soared in February at their fastest pace since December 2015, while overall workloads increased for the first time in nine months.

The headline figure on the construction purchasing managers’ index (PMI) jumped to 52.6 in February, up from 48.4 last month. Figures above 50 on the index show growth, while figures below 50 illustrate decline. The survey was carried out by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).

Read more: UK manufacturing sector continues rebound but warns on coronavirus impact

Building firms said clients were now loosening the purse strings after holding fire on projects in the run-up to Brexit. The survey suggests residential construction has rebounded most strongly, with the biggest expansion in housebuilding since July 2018.

Some firms also highlighted new infrastructure contract awards linked to HS2, which was signed off again by the government last month.

But some firms said severe weather problems had delayed work, and analysts raised concerns about the impact of the coronavirus.

“While construction order books have begun to recover in the opening part of 2020, the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects,” said Tim Moore, economics director at IHS Markit. He said a renewed slowdown could see firms put building investment on hold.

It comes a day after a similar survey for manufacturing showed factory activity accelerating to a 10-month high last month. Analysts said reduced political uncertainty had boosted order books.

But IHS Markit said factories were also reporting growing supply chain issues linked to the coronavirus, which has seen large numbers of plants across China shuttered to contain the outbreak. It highlighted “sizeable raw material delivery delays, rising input costs and increased pressure on stocks of purchases.”

Companies also reported reduced demand from China.