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Wednesday May 06 2020

COVID-19: Britain's construction sector suffers record low in April


LONDON: Britain's construction sector suffered a record drop in activity during April as the coronavirus pandemic shut sites, data showed Wednesday alongside news of surging food sales at online supermarket Ocado.

The latest data showing the UK's biggest sector winners and losers from the COVID-19 outbreak comes as the Bank of England holds a regular meeting Wednesday at which it is expected to keep its main interest rate at a record-low 0.1 percent.

The BoE's policy announcements and new UK growth forecasts will be announced Thursday, ahead of Prime Minister Boris Johnson telling the country on Sunday how he plans to ease its lockdown measures.

It comes amid reports that finance minister Rishi Sunak is looking into tapering the government's furlough scheme that is paying UK workers stuck at home.

Latest government figures showed 6.3 million people are being paid up to 80 percent of their salaries, costing the taxpayer £8.0 billion ($9.8 billion, 9.0 billion euros).

On Wednesday, the closely-watched IHS Markit/CIPS UK construction purchasing managers' index showed a reading of only 8.2 in April, down from 39.3 in March and the lowest since records began in 1997.

A score below 50 indicates a contraction in output.

"Today we found out that social distancing has also brought construction activity to a complete halt," noted Capital Economics analyst Thomas Pugh.

"That indicates that the construction sector has been hit even harder than the services sector."

On the upside, revenue soared more than 40 percent in the second quarter to date at British online supermarket Ocado as people stay at home.

"The importance of internet-based orders during the pandemic should have convinced other grocers around the world of the need to have top-notch infrastructure to fulfil online food orders," said Russ Mould, investment director at AJ Bell.

Times are tougher however for British independent television group ITV, which on Wednesday said advertising revenue slumped 42 percent in April, as leading brands hold onto precious cash.

In an attempt to get retail banks lending during the pandemic, the BoE recently slashed its key interest rate to 0.1 percent and pumped £200 billion of fresh cash into the economy in emergency measures.

"The Bank of England looks unlikely to deliver any further stimulus on Thursday," said Howard Archer, chief economic advisor to the EY ITEM Club.

"However, it is highly likely that the Monetary Policy Committee will make clear that it is ready and willing to take further stimulative action should economic circumstances or financial market conditions warrant."

The BoE is expected also to slash its forecasts for UK economic growth this year and next, according to analysts.