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Over the course of this week we have observed significant increases in construction projects open or returning to site. Delayed projects have also started to decrease significantly. We expect further increases in projects open or restarting and drops in delayed projects over the next few weeks as more companies return to site.
In the planning environment, new applications and decision updates continue to strengthen. Planning applications and decisions are now at relatively normal levels of activity. However, the number of new contract awards and tenders remain weak.
The European Commission published updated forecasts on the economic impact of Covid-19. Its estimates for the UK are a GDP contraction, a doubling of the unemployment rate and a reduction in investment. This week also saw the final reading of the April Markit/CIPS composite PMI. It shows a further large fall in private sector output from March’s reading and confirms the fears that an unprecedented fall in output will occur in April.
In a lesser-reported news item, British households repaid £3.8bn of debt over the month and is the largest repayment on record. This suggests a huge fall in consumption which will impact March’s GDP figures when they are published next week. It also highlights a challenge that will start to concern policy makers as the economy moves out of lockdown. With the UK’s economic model dependent on increasing debt and high levels of consumer spending, citizens will need to return to their previous spending habits for the economy to recover.
Our research efforts continue to provide useful evidence on construction activity. Construction professionals’ thoughts remain fixed on supply chain constraints and the difficulties returning to work. There also appears to be a growing concern about the future: this week we have collected a small number of views on the weakness of the forward-looking pipeline.
There is concern that new work is being deferred, contracts are being cancelled and order books are worryingly low. On-site productivity remains a big issue with estimates of reduced on-site productivity. The shortages in building materials remain apparent. For most companies it remains the largest issue they face at the current time.
This week the value of projects confirmed as opening or restarting has increased. We expect further significant increases in open projects over the coming weeks. Delayed projects have now started to see some significant reductions. We continue to pick up a very small number of projects newly delayed.
Earlier stages of planning activity remain on an upward trend: decision updates continue to increase week-on-week and are now at a level not far from normal numbers. New planning applications are also on a marginally slower upward trend and remain slightly below normal activity levels. However, the volume of contract awards and tenders remains at concerningly low levels.
Projects remaining open have increased further in value and number over the last week. Proportionately, across the UK we have confirmed a larger number of projects as open in the medical and education sectors. Also, there are a larger proportion of projects confirmed open in the London Commercial, Education and Hotel and Leisure sectors.
We have started to see a large increase in projects returning to site this week. Most increases have occurred in the residential sector, with projects restarting across the country. We have also recorded infrastructure projects restarting in Scotland. Elsewhere projects have restarted in London in the Commercial, Education and Hotel and Leisure sectors.
We are now seeing a material drop in delayed projects as more projects return to site. The reduction in delayed projects has occurred mainly in the residential sector. The remaining reductions are in the Commercial, Hotel and Leisure, and Education sectors. We continue to pick up a few newly delayed projects with small values.
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.