6 Ways COVID-19 Has Impacted the Construction Industry
31st July 2020
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At the start of the year, nobody could have predicted how widespread the effects of Covid-19 would be, especially within the construction industry. With no sort of contingency plans in place for this kind of event, the industry was hit hard by site closures, furloughs and redundancies and even some companies calling in the administrators. We are only now starting to the recover some of what has been lost over the last couple of months.
One of the biggest areas impacted by Coronavirus across the country was the number of projects that have been delayed or put on hold. Our research team has confirmed that at its peak, there were over 4,500 projects which had been delayed due to sites shutting down, a lack of funding or a decrease in resources such as workforce or materials to name a few. These delays have been spread across all construction sectors, although the greatest impacts were felt in the residential and commercial sectors. As time has gone on however, news is looking promising for the UK as the vast majority of projects have now resumed.
The introduction of several safety measures on site such as social distancing, frequent cleaning of all the equipment and sending any workers home who may be at risk of infection or infecting others has meant that work can resume on most previously closed sites. Despite the safety measures ensuring that projects can resume across the country, they will also have a direct impact on the productivity and financials of projects and could lead to further disputes in the future. Despite different working practises the construction industry is slowly starting to restore itself.
An issue still being faced despite sites reopening, is the shortage of building materials readily available. Following many manufacturers and merchants shutting down in May, high demand and low availability meant sites were struggling to get the materials and goods they needed to carry on working. This resulted in a price spike that further restricted sites from opening again. Our researchers found that there were a significant number of reports on shortages for materials such as plasterboard, render and mortar to name a few. Now that businesses are starting to open again the struggle has eased for most, however there are still product shortages in some areas of the country. Fears over project inflation due to productivity issues and construction materials delays remain at the forefront of many colleagues’ minds.
Project delays across the country had a knock-on effect to the finances of businesses within the construction industry. A delay in construction leads to delays in completion, which in turn leads to companies not being paid for their work. The combination of no incoming finances as well as continuous outgoings forced companies to try and find ways combat the loss during this time. With government assistance, a lot of construction workers were placed on temporary furlough with 80% of their salary, lowering the outgoing costs of paying staffs wages. For some however, this wasn’t enough and unfortunately redundancies had to be made. Eventually, with very little money being exchanged and options being exhausted, several businesses were forced to go into administration. Those that were lucky enough to avoid going into administration are still treading lightly going forward, with the uncertainty regarding their future and the future of construction in general on their minds.
One area of the construction industry which wasn’t as drastically affected by Coronavirus was within the planning environment. Our in-house research discovered that activity in this area declined, with a 40% decrease in both planning applications and decisions when compared to normal rates. This is mainly due to the fact that most of this work can be carried out remotely. As of now, all elements of planning activity remain on an improving trend. However, we have not yet seen large increases from the depressed Covid-19 levels. Planning applications and tenders are now broadly comparable to pre-crisis levels; however, decision updates and contract awards remain significantly reduced.
With crisis comes innovation. The construction industry has historically been slow to adopt new technologies. But COVID-19 has proven disruptive from the sense of forcing companies to consider how tech can help them get back to work faster whilst adhering to new guidelines. VR, AI and remote working tools have been embraced hurriedly but with sound effect.
Throughout the Covid-19 outbreak, the government has been announcing care packages and grants for businesses to get them through these tough times. Funding to help business through is now being supported by funding to support innovation. One initiative which has been announced in the past month which will be beneficial to the construction industry going forward during this crisis, is the announcement of a £3bn package for improving the energy efficiency of the nation’s buildings. This means that within the tough job environment at the moment brought upon by coronavirus, such as redundancies and insolvencies, there is hope around the corner as in the past, government investments in energy industry have proven effective at creating more jobs.
At the start of the Coronavirus outbreak, challenges arose that brought the construction industry into disarray. With a government ordered nationwide lockdown, roughly 50% of all construction work was halted and there was no easy way to continue working for some. This combined with financial distress, a shortage in materials and staff redundancies caused a decrease in productivity that meant that even some of the largest projects across the UK needed to be shut down.
Despite this, we have persevered, and the construction industry is finding its way back. Looking into the future, it’s safe to say that the safety measures put in place throughout the Covid-19 outbreak are going to stay in place for the foreseeable future. For now, the construction industry is bouncing back to at least achieve a semblance of (new) normality.