The world has changed irrevocably over the last two years, and the events of the past 24 months have not been kind to most businesses. Furlough, repeated lockdowns and rapidly shifting consumer attitudes have seen many companies struggle to survive if they’ve made it through at all.
Amongst the shifting landscapes and difficult conditions, one industry was prioritised fairly early on by the British government to continue work and be designated an essential service – construction. This move has seemingly saved the country’s construction industry; and just two months ago the Construction Products Association’s Summer Forecast predicted a further 13.7% growth in output through the rest of 2021.
What’s more, the company’s analysts predict a further 6.3% growth in construction output through 2022; another impressive increase. For both the remainder of 2021 and the whole of 2022, the construction of infrastructure and private house-building are both suggested key drivers behind the rise in industry output, while analysis behind the commercial sector considers that area a little more subdued.
Construction in Infrastructure
In the infrastructure arena, some major projects nearing completion are central to strong development and output. These include Hinkley Point C, the HS2 (High Speed 2) railway project and the Thames Tideway Tunnel. These ambitious projects have helped develop the Construction Products Association’s growth forecast for infrastructure to 23.4% for the rest of 2021 and 9.7% for 2022. While there are likely to be delays and cost overruns in each of these projects as well as others in infrastructure, these predicted growth figures remain hugely positive. The only area of concern for infrastructure construction appears to be medium-sized projects, which are seeing ongoing hesitancy in sign-off – undoubtedly a hang-up from the coronavirus pandemic and slowing economies that are still, gradually, recovering.
Construction in House Building
House builders continue to report increasing demand in the sector and house price inflation remains robust. As a result, the Construction Products Association forecasts an impressive 20.9% growth through 2021 and 9.0% in 2022. Shifts in working patterns and cultures is seeing an increased demand for homes outside of cities; which house building firms are expecting to keep them in pipeline projects for at least the next nine months. The government’s stamp duty holiday and the Help To Buy scheme still operating in a restricted capacity are impacting on the house building sector, but not enough to dampen these extremely optimistic growth predictions.
Knock-on Impacts from the Coronavirus Pandemic
Indeed, the changes in work for much of the population has not just affected the house building industry. Private housing repair, maintenance and improvements (RM&I) has been the sector in construction that’s the quickest to recover since the initial British national lockdown – and seen a growth that’s elevated it some 19.3% higher than it operated at pre-covid, according to the Office of National Statistics (ONS). The ONS refers to this growth as a result of ‘the race for space’; demand for high quality home office environments and outdoor domestic leisure space. Anecdotally, companies in the RM&I sector are reporting pipeline projects for at least the next six months.
Construction in the Commercial Sector
The beginning of 2021 saw a rise in commercial construction due to the remodelling of office spaces and safe work environments to meet new expectations and safety standards, as well as across retail and leisure properties. Even when social distancing guidelines came to an end and other restrictions eased, demand remained for bigger, roomier and perceived safer indoor areas – and this boded well for the construction companies in this sector. Once construction had been categorised as an essential service, the sector too could complete some of the larger office towers projects that had been signed off pre-lockdown.
The outlook remains somewhat reserved for the commercial sector mainly because of the lack of large projects in the pipeline, particularly in London. This is a result almost directly of the coronavirus pandemic: where no new projects were planned or signed off for a prolonged period due to lockdowns, furloughed staff and pauses in expenditure to preserve business survival.
The positive outlook across the construction industry does come in the midst of a fuel crisis, lorry driver shortage, skilled labour deficit and a climate against which imported construction products cost more than ever. This is a challenging landscape for construction to operate within; making these positive analytics extremely impressive. The perfect storm of the UK exiting the European Union combined with a global virus pandemic has created difficult trading conditions and the construction industry is one of very few facing optimistic outlooks from business analysts. The Construction Products Association’s Economics Director, Noble Francis, advises that these factors aren’t the only things creating challenges. He’s been quoted as saying “The sharp recovery for both UK construction and also in places such as the US, has led to sharp cost increases and extended lead times for some key products such as paints and varnishes, timber, roofing materials, copper and steel. This is of concern particularly for SMEs, which account for 86% of construction employment. Whilst larger contractors and house builders have greater certainty in their pipelines of work and are better able to plan and purchase in advance, SMEs often purchase what they need on the day at builders merchants. This makes them subject to greater issues if supply is limited or costs have risen significantly, particularly for firms working on fixed price contracts”. Positivity Looms Despite all of this, the next year or so looks bright for the construction industry. Truly, as populations have realised the joy of being in a home they love and working for an employer that values their safety and wellbeing, they are fuelling demand for new buildings in all shapes, sizes and sectors. There are not many success stories to have come out of the last two years but luckily for construction, they are definitely one of the few.
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