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This week has seen a relatively small increase in open projects and a fall in delayed projects. We continue to expect further significant falls in delayed projects and increases in open and restarted projects as further sites are reopened. Contract awards and new tenders remain very weak. Planning applications and planning decisions remain in better health.
We continue to pick up useful insight through our research. Construction material shortages are still very apparent and there are concerns over the weakness of the planning pipeline, contractual disputes and financial resilience.
Labour market figures were published by the ONS on Tuesday. Preliminary data for April showed that the number of people claiming unemployment benefits jumped by the largest single monthly rise since comparable records began in 1971.
On Wednesday the ONS published April’s inflation figures. CPI inflation fell to the lowest level since August 2016 and was driven by a fall in energy and fuel prices and heavy discounting from retailers. However, “lived inflation” (the inflation of goods and services consumers are actually buying, rather than those in the ONS’ “basket” of goods that make up the index) continues to greatly outstrip the headline rate.
On Thursday IHS/Markit published its first estimate of its PMI index for May. It showed the UK economy continued to shrink, albeit at a lower rate than in April. The rebound in the rate will feed hopes that the full depth of contraction has now been felt and the economy is starting to recover.
Finally, international imports and exports have fallen to their lowest level for at least four years, according to World Trade Organization.
Our research this week showed broadly a continuation in activity compared to previous weeks. We received a number of reports of manufacturers restarting production and further sites reopening. However, some construction companies are still reporting that sites remain closed.
We are continuing to find a significant number of reports on shortages of construction materials such as plaster, plasterboard, render and mortar. We are also continuing to find respondents turning to medium-term issues, particularly the weakness of the planning pipeline. Many companies report they have not had a project to bid on since the beginning of the crisis, amid reports of previously agreed contracts being delayed or cancelled.
This week the value of projects confirmed open or restarting has increased by a small amount. Almost all the increase has occurred in the residential sector. The value of delayed projects has also reduced.
As per previous weeks, new applications and decision updates remain moderately below pre-Covid levels. Decision updates remain more subdued than new applications, but activity remains within normal activity bands. Contract awards and new tenders remain very subdued.
The projects we have confirmed remaining open have increased by a small amount over the week. With much of the total change occurring in the residential sector – in particular in the South East and South West.
As per last week, we have the largest amount of confirmed open projects in the Medical sector, followed by the Residential sector. The Industrial sector continues to have the smallest open projects. Across the UK, London has the highest number of open projects whereas the lowest levels are in the East Midlands and Yorkshire.
This week we have seen a small increase in restarted projects. Most projects returning to site over the week are in the residential sector in the South East and South West.
Overall, the residential sector has by far the most projects returning to site, followed by the Infrastructure sector. The Industrial sector has the least restarted projects relative to its size. London has the highest level of restarted projects, with the rest of the UK at lower levels. Yorkshire and the East Midlands have the lowest number of restarted projects relative to their size.
Comparably to the change in restarted projects, we have seen a small drop in delayed projects over the course of the week. The number of projects delayed have decreased as we continue to pick up small numbers of newly delayed low value projects.
Almost all of the fall in delays is due to the residential sector. As reported above most of the reduction occurred in the South East and South West. The Hotel, Leisure and Sport sector saw a small increase in delays, so we continue to pick up newly delayed projects through our research, though the volumes are small.
The overall picture is the same as last week. Scotland is now more outlying in terms of remaining delays as all non-essential sites remain closed. Even with the large number of residential sector projects returning to site, the sector remains the most impacted. 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.