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This week there has been a further increase in open projects and a fall in delayed projects. While the Residential sector has again seen the largest change in the volume of open sites, most other sectors have seen a sizeable increase. Across the UK the increases have been shared more fairly, though Scotland remains a significant outlier.
Restarted projects have increased while delayed projects have decreased. The Commercial and Retail sector has overtaken Residential as the most delayed sector relative to its size.
The planning system remains weak: contract awards remain down, and tenders are down compared to pre-crisis levels. Decision updates continue to be subdued but new applications remain robust.
The UK’s economy hit the bottom of the Covid-19 trough in April as lockdown restrictions stopped all but non-essential activity. April’s GDP contracted, wiping nearly two decades of growth. The fall in GDP, while unprecedented, was expected and in line with our forecasts. However, due to the uncertainty of this first estimate there may be a sizeable revision by the ONS over the coming weeks.
This week the OECD published a new set of forecasts of GDP for 2020, with the UK likely to suffer the most out of any country in the developed world. The OECD expects the UK’s 2020 GDP to shrink in 2020.
Economic forecasters have now all but ruled out a V-shaped recovery. The shape currently being mentioned is the “square root” shaped recovery, where growth recovers but is unable to achieve previous output. What is clear is that the path back to previous output levels is going to be significantly longer and more challenging than most initially assumed. It is likely that we are likely to see significant rises in unemployment and the possibility of company insolvencies.
The results of our research this week has again been focused on sites reopening. Most of the information we have collected suggests that most companies have now reopened all sites. However, a number have suggested they will not be returning to site soon.
Preparation for restarting work has commenced in Scotland with many sites expected to reopen over the coming weeks. In the planning pipeline, we have picked up several reports that companies haven’t won any new work since the start of the crisis.
The flow of information on material shortages has slowed greatly. This week we only picked up that one company is struggling to procure glass. Site productivity continues to be mentioned as the single biggest challenge moving forward.
This week the value of projects confirmed open or restarting has again increased significantly. The Residential sector has again seen the largest increases, however other sectors have also seen new sites confirmed open.
The changes have been spread more fairly across the UK this week, with almost all regions contributing. The value of delayed projects has also reduced.
New planning applications remain fairly robust at levels close to pre-Covid levels. Decision updates remain more depressed than previously. Contract awards and new tenders remain very subdued compared to Q1 2020. Tenders remain at approximately 30% below pre-crisis levels and contract awards at -60%.
This week has seen a further significant increase in confirmed open projects. The Residential and Infrastructure sectors have had the largest increases with other sectors having seen smaller increases. The sectors with the lowest levels of delays are Industrial and Medical. In the Residential sector, changes have been spread across the UK. Overall, the North West has the highest increase this week.
The most confirmed open projects (relative to the sector size) continue to be in the Medical sector, followed by the Residential sector. The Industrial sector continues to have the smallest open projects, followed by the Hotel and Leisure sector. Across the UK, London remains the highest number of open projects by a significant margin whereas the lowest levels of open projects remain in the East Midlands and Yorkshire.
This week the Residential sector has seen the largest value of returns with the next largest increases in the Commercial, Infrastructure, and Education sectors. The Hotel and Leisure, Industrial and Medical sectors have seen only small or negligible increases.
The changes have been more spread across the UK this week. London has seen the majority of restarts, but the rest of the UK have also seen fairly significant rises.
This week we have seen a fall in delayed projects. As in previous weeks the Residential sector has seen the largest fall in delays, followed by Retail, Infrastructure and Education sectors.
Scotland remains the outlier in terms of remaining delays. Among the rest of the UK, the areas with the lowest amount of delays relative to their size are Yorkshire, the North East, the North West, the East Midlands and Wales. After several weeks of Residential projects returning to site, the Commercial and Retail sector now has the largest amount of remaining delays relative to its size. The Medical and Industrial sectors remain the least impacted by the delays.
We will continue to provide weekly updates, including themes we uncover as further information becomes available. For a more detailed review of the construction projects affected by COVID-19, please click here and get in touch.