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Building has reported that construction output is expected to rise by 14% this year as the covid vaccine rollout injects new life into the industry, according to a Construction Products Association (CPA) forecast.

Earlier this month, Advantage wrote about new business secretary Kwasi Kwarteng’s message that “it is vital that construction continues through these unsettling times.” Clearly, it has not been business as usual for any sector at the start of 2021, but with construction sites and the housing market remaining open, the sector has proven more resilient than most.

As reported by Building, construction experienced a 14.3% overall contraction in 2020, with output not expected to return to pre-pandemic before next year, when the sector is expected to continue growing by a further 4.9%.

A ‘W’ shaped recovery?

investmentAccording to the CPA forecast, a ‘W’-shaped economic recovery is predicted, with construction output expected to rise 14% in 2021 and 4.9% in 2022.

This takes into account the new lockdown restrictions over winter 2020/21 before a sustained recovery from 2021 Q2 as vaccines are rolled out and the services-based economy can reopen again.

While some sectors of construction are dependent on consumer and business confidence returning, construction activity has largely been able to bounce back quicker than the overall economy.

Demand for private housing likely to pick up in line with economic recovery

The CPA’s Scenarios show that private housing was one of the fastest sectors to recover in 2020, with mortgage lending and property transactions above pre-Covid levels at the end of the year. Pent up demand as well as the government’s stamp duty holiday and the end of the first phase of Help to Buy largely drove the recovery in this sector. Demand for private housing is expected to moderate in 2021 after these policies end on 31st March and then subsequently pick up once again in line with the economic recovery throughout late 2021 and 2022.

A slower recovery for the commercial sector

meetingsA slower recovery has been seen in the commercial sector, with store closures and low rent collection in retail and leisure as well as the shift to working from home causing uncertainty for the offices sub-sector.

Recovery in 2021 and 2022 is further constrained by the long-term shift to e-commerce in retail, which is likely to have been accelerated by consumers switching to online purchasing during the pandemic.

The ongoing question of whether the shift to homeworking will continue after the vaccines are rolled out will be crucial to determining demand for offices space.

 

The government’s Green Homes Grant & a backlog of cladding work could boost activity

Homeworking has on the other hand had a positive impact on the private housing RM&I sector, with households investing accumulated savings from lower daily expenditure back into homes. Although the trajectory for future demand is dependent on labour market conditions as job support schemes end in April, the extension of the government’s Green Homes Grant may help to boost activity. For public housing, a backlog of cladding work is expected to drive activity in RM&I in 2021 and 2022 as the Building Safety Programme moves beyond the removal of Aluminium Composite Material.

Commenting on the Winter Scenarios, the CPA’s Economics Director, Noble Francis, said:

“The spectre of a ‘No Deal’ Brexit that would have badly affected the UK economy and construction in the short term has been avoided but questions over the long term impact of Covid-19 on the structure of the economy still remain. This continues to leave questions about the fortunes of certain construction sectors. This is most notable in the commercial sector, where there is still lots of uncertainty about the future of retail and office space. It will be crucial to observe how businesses change their operations as the vaccine is rolled out in the coming months and to what extent there is a ‘return to the office’.

“While the fortunes of some sectors have been tied to Covid restrictions and associated business and consumer confidence in the wider economy, infrastructure has largely escaped such uncertainty. Projects have been able to effectively enact safe operating procedures given the sector’s large construction sites that have fewer different trades mixing than in most sectors. As such, infrastructure has been least-affected by Covid restrictions and output is expected to lift the whole industry over 2021 and 2022. Main works on HS2, Europe’s largest construction project, along with offshore wind and nuclear projects are expected to be the main drivers of activity.”

Do you require a structural warranty for your project? The Advantage team is proud to work with our clients on developments throughout the UK, adhering to all social distancing guidelines to ensure that projects are covered by the appropriate structural warranty. To find out more about how we could help you with your project, call: 0845 900 3969 or email: sales@ahci.co.uk