May 2021 Data shows green shoots of UK Construction recovery

Two new data releases in May showed further positivity in the UK Construction sector.

Coronavirus Job Retention Scheme

The latest government data shows the number of UK construction employees who are on furlough at the end of March.

The figures at the end of March 2021 do show a solid improvement since the start of January when there was over a quarter of a million construction workers out on furlough.

At 31 March 2021 there were 196,500 construction workers on furlough.  To give this some context in the previous year there was a maximum of 723,600 furloughed on 14 April 2020 and 130,700 at 31 October 2020. 

UK Construction PMI index

The most recent Construction PMI index data from May 2021 shows a levelling off in month on month construction business activity.  The index moved slightly down from 61.7 to 61.6 in April 2021.

This simple data hides what could be further evidence of a huge turnaround in private construction as it represented a strong showing with activity high in government infrastructure, housebuilding and commercial building work. 

This is very encouraging as earlier in the year the Government’s data to February 2021 showed declines in quarterly construction activity largely being driven by significant decreases in private commercial, industrial and new homebuilding offset somewhat by increases of £250m of infrastructure spend and almost £100m of other public works.

MHA Comment

Overall UK construction continues to get back on track and from experience, it is at these times of recovery that companies may experience that their working capital comes under immense stress and further funding is required.

This was evidenced earlier in the year, the Chartered Accountants’ ICAEW quarterly business confidence monitor showed that one of the main challenges was late payment of debts.  Whilst this has been a common theme in the construction sector for many years, especially for second tier sub-contractors, there may be some alternatives from banks keen to assist.  For example, Lloyds Bank have a new scheme aimed at supporting these subcontractors that need to fund plant and machinery required for government projects including HS2.

Further government funding support was announced by Rishi Sunak in March’s budget for small and medium-sized businesses.  The Recovery Loan Scheme aims to help viable SMEs with access up to £10m of government-backed loan funding. 

It is too early to say how popular this will prove to be but early reports from bank sources show that the initial take up is significantly less than that of last year’s Business Interruption Loan Scheme.

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Steve Plaskitt, Partner at MHA, is a Corporate Finance Partner at MHA Tait Walker in Newcastle. If you wish to speak with one of our corporate finance advisers, please get in touch by completing our online enquiry form