RedRock Construction Industry Outlook – March 2020

A brief rally for the industry is overtaken by global events

So where are we now?

As we like to do every month, this March we have taken a close look at the IHS Markit/CIPS UK Construction index update. This survey is an excellent way to test the temperature of the UK construction industry on a month by month basis.

This month the perspective is slightly different, because the update was published on 3rd March, when the UK and indeed the entire world were facing a very different set of circumstances to the ones we are now.

The situation at the beginning of March

Looking back to the beginning of the month, there was quite a positive picture.

The UK construction industry was in a positive place at the beginning of the month

Feedback from industry respondents pointed to the sharpest rise in construction output since December 2018.

There was good evidence to show that following the resolution of the Brexit impasse of 2019, plus the government’s stated commitment to major investment in infrastructure, that the sector may have been returning to a spring in its step just in time for the Spring.

The government has pledged to invest in major infrastructure projects

The survey also pointed to the sharpest rise in new orders since 2015, so there was also the prospect of lots more activity to come.

The index measure was 52.6 (compared to 48.4 the previous month), tipping the industry into the above 50 territory, indicating growth across the sector.

Respondents were seeing increased demand in both the house building and commercial sectors. The only negative was that the poor weather had caused some project delays but all in all there was a general feeling that everything was returning to a normal, more positive status.

A more positive outlook

Where are we now?

Of course, no one could have anticipated the colossal impact of the global coronavirus pandemic and the consequent major impact on all areas of industry and the wider economy.

The coronavirus has affected all industry, including construction

The current advice from government (at time of writing and changing on a daily basis) is that major construction projects can continue. However, it is not yet clear how long this will last

An article from Design & Build, has noted the devastating impact on the construction industry of Hubei province in China, where the virus originated.

Likewise in Italy, the country which has seen the next greatest affect, there has also been a sharp drop in construction activity. All construction in Lombardy, the worst affected region has been halted to help control the spread of the disease, although vital infrastructure projects including roads and hospitals have been allowed to continue.

Key infrastructure projects in Italy are continuing

The situation in the UK

The decision by the UK government to allow construction projects to proceed,  has caused some consternation.

There are fears that construction workers will find it difficult to adequately socially distance on site, plus there is the potential wider impact of people travelling to and from work, and the possibility of building site injuries adding additional strain on an already stretched NHS.

Construction site injuries may add extra strain on the NHS

The Sun recently featured a plea from a trauma surgeon who said that medics may not be able to patch up or do the ‘heroic salvage of limbs’ which is required after some building site injuries.

Some contractors have closed their sites for these reasons including Transport for London and Crossrail.

The future

The current situation is likely to last some time, particularly with so many different elements affected including supply chains, tendering processes and the movement of workers.  This could lead to an impact on the industry for some months to come.

It is unclear how long the current situation will last

The good news if there is any will be that the government is likely to prioritise investment on infrastructure when we return to normality in order to help to stimulate the overall economy.

For now it is a waiting game to see how long this highly unprecedented situation will last.

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