The rate of UK construction job cuts increased sharply in July despite the industry’s fastest rise in output since 2015, a closely followed survey showed today.
Around one-third of employers in the UK construction sector reported a decline in employment for July, IHS Markit’s UK Construction Purchasing’ Managers’ Index (PMI) report found.
That came despite a “sharp and accelerated” boom in activity as lockdowns across the UK eased last month.
UK construction rose from 55.3 in June to a score of 58.1 for IHS Markit’s July index, on which anything over 50 represents growth.
Residential homes were the main growth driver in July, with such construction projects increasing at their fastest pace since September 2014. UK builders cited pent-up demand for residential projects in lockdown and reduced anxiety.
Commercial and civil engineering work also grew slightly quicker than they did in June, mostly as builders caught up with pre-coronavirus projects.
July also saw the fastest rise in new UK construction orders since February. But margins were squeezed as some clients failed to commit to new projects.
Chart: The UK construction industry’s monthly measure of output since lockdown began in late March (above 50=growth)
Construction firms were optimistic about the prospect of a recovery in business activity over the next 12 months. A total of 43 per cent predicted a rise in output over the period, compared to 30 per cent predicting a drop.
But rising job cuts in the UK construction industy come as the Bank of England today predicted a rise in unemployment to a rate of 7.5 per cent.
“Concerns about the pipeline of new work across the construction sector and intense pressure on margins go a long way to explain the sharp and accelerated fall in employment numbers reported during July,” said Tim Moore, economics director at IHS Markit.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, added: “With another sharp fall in staffing levels, the number of redundancies increasing and competition for raw materials resulting in higher costs, holes are already starting to appear just as the sector regains its strength.
“After a summer of this blistering return to growth, [UK construction] companies should prepare for a chilly autumn as furlough schemes come to an end and the real strength of the UK economy is revealed.”