The anticipated decline in output is one of three scenarios for
construction output examined by the CPA.
Even under its most optimistic scenario, the country’s
construction activity would suffer its sharpest fall ever recorded, the CPA
said.
Around 60% of planned construction work was lost in April as a result of construction work being paused during the coronavirus lockdown to implement social distancing measures.
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But the loss in output in April varies across sectors and
nations. An estimated 83% of work in Scotland did not take place due to more
stringent lockdown measures, 85% of house building output was lost and 60% of
non-residential new build was lost.
In the residential repairs, maintenance and improvements sector,
around 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’s most optimistic scenario for a recovery in output
is based on a ‘V’-shaped recession affecting primarily the second half of
March, April and May, followed by a rebound from June at a slower pace than the
initial decline. Its 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).
CPA 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.”
