Property update: The construction industry - a 12 month overview

Published: Wednesday 24 March 2021

Understandably, the past 12 months have been challenging and the construction industry has had to adapt to new ways of working, such as social distancing and new working practices. During the first national lockdown, building sites were closed for a short period, but the second and third lockdowns allowed construction sites to remain open, with the government seeing the importance the sector has on the economy and infrastructure of the UK. 

The government provided a lifeline to the sector by announcing a number of incentives, such as the coronavirus job retention scheme (CJRS) and self-employed income support scheme (SEISS), to assist businesses that had been impacted and had to keep employees at home.

CJRS statistics from the government show that in construction, furlough peaked on 14 April 2020 with 723,600 employees furloughed, with provisional estimates showing that at the end of December 2020, the number was at 193,400. For SEISS, it is no surprise that construction was the highest sector in terms of value and number of applications. Covering the three grants provided to date for self-employed contractors and businesses working within the industry, by 31 December 2020, 659,000 claims have been made with a total cost of £2.2 billion, equating to 41% of total claims made in the scheme. Without this support, the number of businesses still operating would be significantly lower. More worryingly, there is still a significant proportion of the workforce on furlough, meaning output has not returned to pre-pandemic levels.

With sites shut and fixed overheads still being incurred, the announcement of government backed loan schemes, again, provided many with a level of borrowing to assist with initial working capital concerns to support cash flow during a period of site closures. 

As COVID-19 continued to impact the UK (if that was not already an unwelcome distraction) at the end of December, the transition period for Brexit finished and the UK left the EU. Whilst the construction sector has not been impacted as much as others, the industry is seeing signs of smaller impacts such as material shortages, which is likely to have a bearing on the delivery and timing of contracts. One example of this is Sweden, which has recently seen an increase in the rate of COVID-19. 

With Sweden being the largest exporter of timber to the UK, the delivery and timing of materials to the UK is likely to be impacted and businesses may have to look at alternative supply chains to source materials. Together with congestion at ports, materials are not finding their way to the builders’ merchants to fulfil orders/supply chain, which is a concern. The cost of materials has increased due to Brexit, with a rise in shipping costs and demand for already scarce materials creating an uplift in material prices.

In what has been a difficult year for the sector, businesses have continued to be resilient and adapt to the new challenges they are facing, such as looking at the design phase and thinking about ‘offsite’ construction to cater to the need for safe working practices, as sometimes, prefabrication work can help to deliver the contract in a more efficient and timely manner. Others have looked to change working patterns to accommodate numbers on site with flexible working, something which may be with us for some time.

Key contacts

Nick Haines
Nick Haines
Partner
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Dan Town
Dan Town
Director
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Johanne Tisdale
Johanne Tisdale
Associate Director
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