Total construction output in Great Britain is expected to fall by 25% during
2020, according to the Construction Products Association.
The anticipated decline in output is one of three scenarios
for construction output examined by the CPA. Even under this most optimistic of
scenarios, the country’s construction activity would suffer its sharpest fall
ever recorded.
The pause to construction work as a result of Covid-19 social distancing
measures is the main cause of the fall, with 60% of planned construction output
lost in April due to the measures.
The loss to construction output in April varies across sectors and nations,
with an estimated 83% of work in Scotland lost due to more stringent lockdown
measures, 85% of house building lost and 60% of non-residential new build lost.
The story is equally bleak for residential repairs, maintenance and
improvements works where 60% of work was lost, concentrated mainly in the
‘improvements’ element. The non-residential repair and maintenance sector saw
only a 20% loss of activity, as work to repair largely un-used buildings and
infrastructure such as roads and schools was brought forward.
The CPA has developed a series of scenarios
to assess the impact of Covid-19 on construction output, given that the full
effects of the pandemic are so wide ranging and lack precedents. The full
impact on the UK economy and construction will only become clear once the
duration and severity of social distancing requirements in apparent, along with
the effects this has on demand.
The most optimistic scenario is based on a ‘V’-shaped recession affecting
primarily the second half of March, April and May, followed by a recovery from
June at a slower pace than the initial decline. The other scenarios include a
W-shaped recession (a second wave of infection and lockdown in 2020 Q4 and
subsequent recovery in 2021 Q1) and a U-shaped recession (continued
restrictions throughout 2020 and a slow recovery in 2021 as businesses and
consumers come out of it highly risk-averse).
Commenting on the Spring Scenarios, the CPA’s Economics Director, Noble
Francis, said, “The greatest impacts of the lockdown in construction were seen
in the private housing sector. Returns to site in May will focus on partially
completed developments rather than new starts as house builders are expected to
be very cautious given uncertainty regarding demand. This uncertainty will also
keep the recovery muted in commercial offices, industrial factories and the
most-severely affected sub-sector, commercial retail.
“A more positive outlook is expected for infrastructure activity thanks to a
greater ability to implement safe distancing for workers on larger sites but
also, vitally, thanks to HS2 being given the go ahead to proceed. An increase
in activity from the five-year investment programmes within regulated sectors
such as water and sewerage, roads and rail also adds to this more positive
story.
“For the fortunes of construction more generally, though, the near-term
effect of Covid-19 on the economy and employment are likely to be considerably
greater than those faced during the financial crisis of 2008/09. In addition to
these issues around the general economy and construction demand, productivity
on site has fallen significantly due to social distancing and other safety,
which means that construction activity will take longer and cost more. Even in
our most optimistic scenario, construction output bounces back by 25.5% in 2021
but, with growth starting from a low base, output will still be 6% lower than
in 2019. Combined with the high levels of uncertainty on demand, getting levels
of construction back to pre-Coronavirus levels will take time. Expect a long
slog ahead.”
