Covid-19 and its impact on the Construction Industry

It is with no doubt that the construction sector was easily characterised by the uncertainty of the long drawn out Brexit issue in 2019, however, the situation in 2020 has not really improved much and had recently transformed into the uncertainty and potential chaos surrounding Covid-19.

It was hoped that when the UK finally left the EU in January we would see an uplift however it did little to lift the mood as the UK then faced some adverse winter storms which in some areas left construction sites inundated for a number of days, with little possibility of any works taking place. Added to this has been the restrictions placed on normal behaviours and actions as the Government tried to contain the Covid-19 virus.

It is noted that the key impacts of Covid-19 for the construction sector have been varied. There was initial confusion surrounding advice given by the Government as to how construction sites would be classified, should they be key workers or non-essential? Surely this would be variable due to the number of different construction sectors and since the majority of construction skills could not be carried out “at home”. How are construction sites able to adopt safe distancing of 2 metres when working which has proved impossible to maintain up till now.

Into April 2020, the discussion has switched from “possible downturn” for the construction sector to how deep the inevitable downturn will be. The focus is now on whether it will be a “V-shape”, “U-shape” or an “extended L-shape” downturn and recovery pattern. The impact for construction output will inevitably be determined by how long the social isolation and lockdown measures are to be kept in place. This impact will also have an influence on business confidence and investment levels as well as consumer spending on non-essentials, which underpins many of the private commercial sectors.

We will also see a further muddying of the waters from the ever-present question “what will be the shape of the final Brexit trade deal?”. Although further postponements have been mooted in the face of Covid-19 the UK will be trading outside of the EU potentially as early as 2021 and this could have significant implications for some construction products sectors.

The current forecast indicates significant output downturn in Q2-Q3 followed by a return to some form of growth in Q4 2020 or Q1 2021. Overall construction output is forecast to decrease by 19% in 2020 to around £144.8bn which will be followed by overall growth of around 17% to 2024 when output is forecast to reach £169.3bn.