Coronavirus Market Update – 24th April 2020

Suspended sites are still the most visible manifestation of how the Coronavirus is impacting UK construction and our researchers have identified and verified a rising number of sites where work is now suspended.

At almost 3,500, the number of suspended sites account for 39% of all projects currently on site and a similar proportion of work by value, but these suspensions are not evenly spread across the industry. More extensive shut downs are in place in Scotland and Northern Ireland at the request of the devolved authorities: 79% of sites in Northern Ireland and 80% in Scotland are currently suspended.

Encouragingly though, our researchers have also found that work has now resumed on 10% of sites that were initially suspended at the outset of the lockdown.

Private Housing

While private housing is the worst affected sector with 60% of sites currently suspended, there are signs that activity is likely to pick-up over the coming weeks. Both Vistry and Taylor Wimpey have announced that they will resume work on some sites from next month.

In addition, the major mortgage lenders are improving their borrowing terms – which should help to support new house sales and potentially lift sector activity over the coming months.

We will continue to closely monitor site activity over the weeks ahead to be able to provide insight of when and where sites are reactivating; what we’re trying to do is to help firms to prepare to judge when the time is right to begin investment in plant and materials, look at un-furloughing staff and gear up to meet a revival in construction activity.

We’re keenly monitoring the leading indicators that will be first early warning of revival, because of course, activity on current construction sites only tells half the story,

Development Pipeline

We are also closely monitoring the development pipeline to identify where new opportunities will emerge over the coming months and the good news is that the early development pipeline still remains firm.

Our researchers have seen only a small decline in the overall number of planning applications and decisions being published by planning authorities each day. Overall, average number of applications submitted has dropped by 10% since the lockdown began compared to the earlier part of this year and the number of decisions is just 7% lower. These declines are relatively modest and may in part be due to reduced staffing at authorities delaying the publication of applications and decisions.

Individual local authorities are adopting differing approaches for dealing with planning applications during the lockdown. Cardiff City Council has simply suspended its planning committee, although the rest of Wales seems to be carrying on. But more positively, a number of local authorities have moved the work of their committees online. For example, Ashford Borough Council has recently approved plans via virtual planning committee meeting for a new £250 million film studios complex.

However, the more immediate pipeline has weakened since the lockdown came into force, as you’d expect.

Contract Awards

The number of main contract awards since mid-March is down by third on the same period a year ago, but interestingly the value of contracts awarded has only declined by 21% over the same period, indicating that a greater proportion of the work being awarded is higher value projects.

The slowdown in contract awards may in-part reflect greater caution among smaller clients to commit to projects in the present economic environment. However, the lockdown and the increase in remote working is also likely to have lengthened the decision-making process, perhaps contributing to the fall of in contract awards as these decisions are delayed.

Accordingly, we’re expecting there to be a marked rebound in invitations to tender and contract awards as lock down restrictions are eased which could create a wealth of new business opportunities for firms who are prepared to capitalise on them.

It feels as though we’re approaching an important turning point in this crisis and so we’re monitoring all the leading indicators and keeping close in touch with the major developers to understand when the optimal moment is for firms to mobilise their resources to get ahead of their competitors, rebuild their workload and steal market share.

If you would like to know more about these opportunities as they arise, or if you’d like to talk to us about the detail behind the numbers then please do get in touch - we’re here to help and support the industry.