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Monday, May 25, 2020

Construction activity in Europe collapses when the blockade hits builders

The construction sector in Europe suffered the largest drop in activity since the financial crisis after the closure of many construction sites and the supply of workers, materials and safety equipment was severely interrupted by the coronavirus pandemic.

The survey of IHS Markit purchasing managers for construction fell from 52.5 in February to 33.5 in March, data released on Monday showed. A reading below 50 indicates that most businesses reported deteriorating business.

Bernard Aw, chief economist of IHS Markit, said: “The eurozone construction sector fell into a severe recession in March due to measures to contain the activity and demand of the Covid-19 epidemic.”

Construction and engineering groups, which employ 16 million people across Europe, have warned of “extremely harmful and long-term effects” caused by severe restrictions on their work to slow the spread of the virus.

“The activity is falling from about 60 to 70% in southern Europe: this is an unprecedented closure”, said Domenico Campogrande, general manager of the European Construction Federation.

The figures came when separate data showed that investor sentiment in the euro area reached a record high, as pessimism surpassed even the lowest point of the financial crisis over a decade ago. The Sentix investor survey found that sentiment about the eurozone economy fell 25.8 points month-over-month to minus 42.9, its lowest point since the start of the survey in 2001.

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“The coronavirus maintains a tight global economy: without exception, all regions of the world are in a deep recession,” said Patrick Hussy, CEO of Sentix. “Never before has the assessment of the current situation collapsed so abruptly in all regions of the world within a month.”

The construction sector is asking for help from the European Commission and on Tuesday the representatives of the sector will have a video call with Thierry Breton, European Commissioner for the single market. Production problems and restrictions on the movement of people and goods are causing serious problems in the shortage of materials and workers for the industry, said Campogrande.

The slowdown in construction has had an impact on employment: Eurozone construction firms have reduced staff at the fastest pace for a decade, according to the PMI survey.

“There are many self-employed workers in construction – especially in the UK – and clearly everything is blocked for them,” said Campogrande. “At most construction sites you need masks as a minimum, but many construction companies have given their equipment to hospitals because of the urgent need and now they don’t have enough. So now they are in a difficult situation.”

Italy and Spain, the two European countries most affected by the virus, have both stopped many non-essential commercial activities, forcing most of the yards to close. The PMI index of the Italian construction sector reached 15.9 in March, the lowest level since the survey began in 1999.

Gabriele Buia, president of the national association of construction companies in Italy, asked last week for an injection of liquidity into the country’s economy through commercial banks with state guarantees such as “it is now clear that without immediate action … many companies they will not be able to recover “from the crisis.

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Construction activities in the UK have declined at a faster pace since the financial crisis, as many builders have stopped working and the pandemic has hit demand. The UK construction PMI fell to 39.3 in March from 52.6 in the previous month.

The European auto industry was also severely affected, according to separate data released Monday. The poll of the Ifo Institute of Economics found that business expectations in the automotive sector fell from minus 19.7 points in February to minus 33.7 points in March.

UK new car registrations declined 44.4 percent last month after most showrooms closed.

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