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.”