What can Construction Expect to Face in 2021?

With the pressures inflicted on the construction industry by Covid-19 in 2020 many firms will be breathing a sigh of relief to have reached the end of the year. Parm Bhangal, Managing Director of multi-award winning quantity surveying and estimating firm, Bhangals Construction Consultants, reflects on how the industry has fared during a tumultuous year and gives his insights on what it is likely to face in 2021.

The construction industry has faced unprecedented challenges during 2020 following the onset of the Coronavirus pandemic. Looking back to the second quarter of the year construction output in Great Britain fell by nearly 36%.

Firms working on everything from small domestic projects right through to multi-million commercial schemes saw their endeavours come to a standstill with the introduction of the first lockdown. As we know sadly, as a consequence, not all construction firms who were operating at the beginning of 2020 have made it through to the end of the year.

Fortunately, suspended sites in England and Wales reopened more rapidly than initially anticipated which brought a breath of life back to the nation’s construction industry. This translated into construction output growing by a record 41.7% – or in cash terms £11,070 million – during the third quarter of the year. This is by far the largest demonstration of growth since quarterly records were introduced at the beginning of 1997 and substantially larger than the previous record quarterly growth of 4.9% in the second quarter of 2010.

The growth in the third quarter of 2020 was also the first time the industry experienced month-on-month growth since the early part of 2018. However, growth did slow over the period, starting off strongly with output increasing by 17.4% in July, then dropping to 3.8% in August and finally ending with 2.9% in September.

September’s £369 million increase was driven by growth in the areas of new work and repair and maintenance. There was growth across all construction sectors, apart from public new housing and other new public work, but only private new housing and infrastructure recovered above their February 2020 pre-pandemic levels. New housing overall grew by 88.7%, or £1,527 million, in quarter three of 2020, driven by 102.9% – £1,531 million – growth in private housing. Anecdotal evidence has suggested work on larger civil engineering sites more easily adapted to social distancing measures. For housebuilders, anecdotal evidence suggested firms managed to continue to work at sufficient capacity, particularly on sites currently in progress when the first lockdown hit.

All other types of work failed to recover to their pre-pandemic levels by September 2020, with public new housing the furthest below its February 2020 level at 29.4%.

Despite the increased output in the latter part of the year, it is clear coronavirus continues to have an impact on the industry. Overall, productivity in the construction sector remained 7.3% lower in September than it was in February, before the main impacts of the pandemic were seen. Health and safety measures, such as social distancing, have meant the capacity and level of work are not at the same level experienced prior to such restrictions being imposed.

Looking ahead industry experts are predicting the construction business is likely to experience a gradual and sustained recovery over the next two years. Although health and safety measures may continue to have an impact on the industry going forward it was heartening to see a widespread closure of construction sites was not required during the second national lockdown towards the end of 2020.

It is expected that consumer confidence will go up when a Covid-19 vaccine comes out and that this will lead to a rise in the number of individuals undertaking construction projects. Hopefully, a vaccine will help to get the country back to normality and lead to a reduction in the current restrictions which hold back productivity.

There are also predictions of increased public sector investment in 2021, particularly in road schemes, to help underpin the ongoing recovery of the construction industry. There are suggestions that 2021 will see an increase in school building projects as councils seek to reduce the nation’s shortage of available secondary school places. There have also been promises made about increases to NHS capital funding which is expected to lead to the advent of more building projects. The Government has further promised to boost investment in infrastructure and there is an expectation that civil engineering projects disrupted by lockdown this year will recover in 2021. In addition to this, major schemes, such as the £4 billion Thames Tideway Tunnel project and HS2, are expected to boost Great Britain’s civil engineering output over the next couple of years.

However, the beginning of the New Year will also bring with it Brexit on January 1 which is expected to create its own challenges. It is predicted that new customs regulations and non-tariff barriers may disrupt supply chains for the construction industry and the wider economy which could have an impact on the country’s economic recovery from the pandemic.

If the construction industry does experience material shortages it could lead to an increase in costs which may in turn slow down future building projects. The UK’s departure from the EU is also expected to shrink the availability of skilled site labour in this country.

To safeguard themselves against the ongoing challenges presented by Covid-19 and Brexit in 2021 and the years ahead, firms would be wise to invest in digital and design solutions that reduce the amount of time spent on site at the pre-construction and construction stage of projects. This will cut down their reliance on on-site labour which will help them to reduce the impact of any ongoing Covid-19 restrictions and any difficulties they may face in hiring skilled workers.

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