What Impact will Covid-19 have on the Construction Industry in 2020?
Jun 10, 2020
The answer to this question is not an easy one to unravel. None of us can predict the future, we can only assume in these uncertain times, based on what has happened so far this year.
At the beginning of May, £61 billion was the total value of projects that have been put on hold in the UK due to the impact of coronavirus, and 4,600 construction projects placed on hold due to the Government restrictions.
Some sites that were deemed essential remained open, but many have done so with a reduced workforce and new measures have been put in place, as recommended by the government to help reduce the spread of Covid-19. In mid-April, the government gave permission for the HS2 project to go ahead into the construction phase and many other large organisations have also been given the go-ahead to recommence projects.
This has also extended to those companies that supply the industry and sites such as steelworks and brick manufacturers who have also been allowed to recommence work with special measures in place.
Recent Figures on Construction Sites from May 2020
Towards the end of April, Covid-19 testing was extended to include construction workers. However, despite the news of many sites re-opening and more testing in place, the figures for the number of sites that have been suspended continued to rise and during the last week of April, this figure was confirmed by Glenigan to be 3,500 – 39% of total sites across the UK with the worst affected nations being Scotland and Northern Ireland.
Since then, however, with the easing of lockdown restrictions, sites have started to reopen:
- Week beginning 18th May saw 585 sites re-open, a rise of 295 the previous week
- A large number of the sites that have re-opened include education, office and health-related sites
- By 26th May a total of 38% of sites in total had re-opened which had previously seen work suspended, however, 2,201 sites still remained closed
- The largest number of sites re-opened are located in England, Wales has seen some sites re-open, however, Scotland sites have remained closed
- The private housing sector has seen the highest number of sites still suspended
Positive News on the Impact of Covid-19 on the Building Industry
Although we are still not certain when many of the remaining suspended sites will be re-opened, there is some positive news. As the lockdown restrictions continue to ease, there is a possibility that the number of invitations to tender will increase, creating more opportunities for firms.
There is also said to be only a small decline in the number of planning applications that are being processed, but this could be due largely to a reduced local authority workforce rather than a reduction in application submissions. Another positive is that some mortgage lenders are working to improve borrowing terms to help encourage interest in the market, which will in turn help to support demand in the industry.
Joanne Keit, Commercial Director at Glenigan, the industry research experts, said:
“As the market recovers, contractors and subcontractors will need to be especially vigilant when bidding for work, seeking a suitably diverse portfolio of projects to safeguard their cash flow. Firms will also need to be mindful of the potential impact of social distancing on both the cost and the potential build times of the projects that they are bidding for.”
“Glass half full?”
Amsterdam based design consultancy Arcadis put forward their estimates on two different potential scenarios, post-Covid-19 – optimistic and pessimistic.
It is thought that supply chain capacity could be one of the largest issues faced and that it will be important to retain strong relationships with suppliers to help work through the mounting number of delayed projects due to suspension, as well as sourcing for new opportunities. However, during recent weeks we have seen the supply chain start to stabilise.
An optimistic approach to estimating growth in the industry into 2021 is said to rely on factors such as government support programmes to help sustain capacity, prices being determined in competition and contracts applying a flexible risk-sharing approach to any disruption caused by Covid-19.
The pessimistic outlook or worst-case scenario could be that contracts are not adapted to deal with disruption, prices for work are unmanageable due to ‘unpriceable unknowns’ and the possibility that distancing and restriction measures are unsuccessful leading to further disruption and causing productivity across the UK to fall.
The outlook overall is a positive one, but at this stage, there is still no certain way of knowing exactly what will happen leading into 2021. Currently, the main concern for experts who are continually researching the impact of Covid-19 on the construction industry is that some of the biggest issues may occur when many sites re-open or demand rises and firms struggle to find the staff and materials to meet the demand.
A fourth version of the official guidance on Site Operating Procedures was released by the CLC on 18th May – click here to view.
Continuing to Supply the Construction Industry – strukta Group
strukta Group will continue to support the construction industry throughout the Covid-19 crisis. With an extensive product range in stock for next day delivery to your sites, we’ll provide building products to meet your requirements. Give our team a call on 033 33 21 00 13 and we’ll be happy to help you.