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The last week has seen a plateauing in the volume of delayed construction projects due to Covid-19, with the total value currently standing at £68bn. Planning information remains within normal activity levels, albeit at the lower end of typical volumes.
The most relevant economic news this week was the publication of IHS/Markit’s Purchasing Managers’ Indices for March. The index for construction fell at the steepest rate since the financial crisis in 2009. While the next few months looks bleak, the hope remains that with increased public-sector investment and government support schemes, the sector can start to recover in the second half of 2020. The difficulty is assessing what happens next: with movement restrictions likely in place until at least mid-May, it is uncertain how quickly normal activity will be able to resume.
The most frequent issue reported remains, somewhat unsurprisingly, customer closures and falls in demand. Around a third of respondents consider this the most challenging issue they are currently facing. However other issues are also high in the minds of construction industry staff. The next largest issues are Government restrictions, supply of materials, business planning uncertainty and planning pipeline concerns. Critical work on infrastructure, hospitals, schools and across the public sector appears to be continuing.
This week we have seen a plateauing of new delayed projects. We have seen a small number of projects returning to site as contractors reopen, complying with social distancing guidelines, but they are not coming through in any significant volume so far. We have also seen a small overall increase again in projects delayed in the planning process.
Planning activity appears to be moving slightly downwards towards the lower band of normal activity for both new applications and decision updates. Projects being submitted for tender remain high with several high-value projects reaching this stage. March did see the smallest number of new contract awards since December 2018, meaning that we saw a small number of high value projects.
Most Covid-19 project delays so far continue to be in the residential construction sector, meaning the residential sector remains the most affected. The changes over the week have been marginal: only a smaller number of projects have been delayed according to our research.
London remains the UK region with the largest value of delayed projects, with Scotland closely following. West Midlands and Yorkshire and Humber have seen the largest increases across the whole of the construction industry this week in delayed projects, though the rates are much lower compared to last week.
As we have not seen major changes in the volume of delayed projects in the last week, there is no significant change in planning stage information: most projects delayed are those that are under construction.
The average value of projects impacted by Covid-19 is concentrated in the £10-50m and £100-500m categories when considering project value. When considering the number of projects, the most delays are in the £10-50m category and the £1-10m category.
We will continue to provide weekly updates, including themes we uncover as further information becomes available. For a more detailed review of the projects affected by COVID-19, please click here and get in touch.