Market Research Bulletin 31 March

Market Research Bulletin: Construction work must keep going to help economy survive - Nadhim Zahawi


  • Communities and Housing Secretary Robert Jenrick confirmed that construction on sites can continue. Currently, the issue of whether or not a site stays open is a matter of conscience as current regulations permit work to continue on site. Mr Jenrick said:

“If you are working on site, you can continue to do so. But follow Public Health England guidance on social distancing.”

Robert Jenrick

This advice has since been expanded on by the Cabinet Office which said that employers who have people on site should ensure that employees are able to follow PHE guidelines including, “where possible”, maintaining a 2m distance from others. This differs from previous advice which said businesses wishing to remain open "must ensure a distance of 2m" between staff and customers. Some sites voluntarily closed last week, triggered by Health & Safety and insurance concerns.

  • Nadhim Zahawi, under-secretary of state for business, has reaffirmed that house-building and other construction work must keep going to help the economy survive the devastation of the coronavirus pandemic. He said some are wrongly interpreting the current rules and are unfairly criticising businesses for implementing the rules correctly. He explained that it has been:

"...disappointing that those who feel the need to criticise any and all private sector work have started attacking companies for staying open when their work cannot be done remotely. It does not matter whether they appear on that key worker list, what matters is that they follow the rules the government has set out."

Nadhim Zahawi
  • The Construction Leadership Council (CLC) and Construction Industry Taskforce have published guidance for construction sites operating during the COVID-19 pandemic. The ‘Site Operating Procedures – Protecting Your Workforce’ document, which can be found here, provides advice on how to keep construction sites open whilst protecting workforce and minimising the risk of spread of infection.
  • New Guidance issued by the Ministry of Housing, Communities and Local Government (MHCLG) has instructed estate agents to work remotely. This guidance also prohibits home viewings and advises people to delay moving dates where possible. The move followed calls from banks to freeze the market due to the risk of granting credit in a highly volatile economy.
  • March has been a gloomy month for the construction sector with the share prices of many publicly listed firms falling significantly. Contractors Costain, Lendlease and Royal Bam Group saw their share prices fall 77.5%, 46.4% and 44.6% respectively between 2 March and 27 March 2020. Costain’s fall comes against a wider backdrop of losses on the markets but has been exacerbated by its recent £100m rights issue to help sure up its balance sheet and its recent full-year results which reported that underlying profits had fallen by two-thirds.
  • The Government has confirmed that building merchants are an essential service and can stay open during the COVID-19 pandemic lockdown. Chief executive of the Builders Merchants Federation (BMF) John Newcomb said:

“The advice we received from BEIS following this morning’s briefing call makes it clear that merchants should continue to operate. Ideally, this should be through online and delivery services, but those who need to maintain depot service are able to do so providing they observe PHE guidance including social distancing, cleaning and hygiene, staff welfare and all other means to minimise the risks of transmitting coronavirus.”

Merchants such as Travis Perkins, Jewson and Howdens closed branches last week but have since been told by the Government, via their trade association, to get their doors back open as they are a vital part of the construction supply chain. Meanwhile, online-only builders' merchant BSO reported that demand has doubled for materials such as timber and insulation since the crisis began.

  • London firms continuing with construction work on site have been told to alter their working hours in order to avoid peak travel hours and reduce pressure on public transport. BuildUK’s latest coronavirus update, which it produces alongside the Construction Leadership Council (CLC), advises that workers travel later in the morning and evening in order to “protect themselves, critical workers and transport staff”. The CLC also advised employers to issue workers with a letter explaining that they are a construction worker or supplying services to a construction site in the event that they are asked to verify they are on an essential trip.


  • Chancellor Rishi Sunak has unveiled unprecedented support and rescue packages comprising of wage subsidies, tax cuts, low-interest rate loans and grants. The Government’s open-ended commitment to effectively underwrite the entire nations wage bill is an attempt to prevent layoffs and keep businesses running. However the Institute of Fiscal Studies (IFS) has warned that the total cost of the Chancellors economic rescue package is “unknowable”.
  • The Bank of England has warned of a very sharp economic downturn as the coronavirus forces businesses to close and reduces consumer spending. The Monetary Policy Committee (MPC), which kept interest rates unchanged at 0.1%, pledged to take whatever steps necessary to prevent disorderly financial markets amplifying the downturn as it warned of longer-term damage to the economy. The MPC also printed £200bn and bought UK government bonds but acknowledged that the BoE’s actions would not prevent the economy falling into a deep recession.
  • According to the latest data by IHS Markit/ CIPS, the flash UK composite PMI fell from 53.0 in February to just 37.1 in March 2020 – signalling the fastest downturn in private sector business activity since the series began in January 1998. The monthly fall is more than three times bigger than its previous record. Historical comparisons indicate that the March survey reading is consistent with GDP falling at a quarterly rate of 1.5-2.0%, a decline which is sufficiently large to push the economy into a contraction in the first quarter of 2020.
Ihs Markit
  • There were 477,00 new claims for universal credit in the nine days to 24th March 2020, representing 1.4% of the UK’s working population. The Department for Work and Pensions has been struggling to cope with the tenfold increase in applications and has decided to hire 1,500 additional staff to help meet the unprecedented demand.


  • Global economies are grappling with a trade-off between public health and a long-term hit to economic growth. China, which has not seen a year-on-year decline in economic growth since 1976, could see first quarter economic growth fall by as much as 11% year-on-year whilst economists expect US GDP to contract by up to 6% in Q1 2020 despite announcing a $2trn stimulus package.
  • Monetary commitments from governments and central banks globally in response to the coronavirus pandemic are close to $7trn. The total includes government spending, loan guarantees, and tax breaks, as well as money printing by central banks to buy assets such as bonds. The combined effort dwarfs the response to the 2008 financial crisis, which smashed records at the time.


  • Several construction materials firms have suspended non-critical production at their UK sites in a bid to reduce operating costs and preserve cash. Breedon, Michelmersh, Forterra and Ibstock have all suspended production and deliveries to varying extents in light of lower demand as a result of the COVID-19 pandemic. Many have said that over the next few weeks that they intend to serve only critical supply needs until the restrictions on movement are relaxed.
  • Copper prices have hit a 4-year low as fears intensified that the pandemic would lead to a global recession. With the market bracing for a huge demand shock, traders forecast that the pandemic will put a huge dent in global industrial production with JP Morgan analysts expecting production to fall by more than 10% year-on-year in February and March.


  • Contractors are currently split over the issue of whether sites should close and a range of approaches have been adopted. Some plan to keep sites open in line with Government advice (E.g. Kier, Balfour Beatty and Wilmott Dixon) whilst others, such as Lendlease and Sir Robert McAlpine have begun to shut down many of their sites for the near-term. A growing number of contractors have temporarily suspended works whilst they conduct risk assessments and implement new procedures that comply with new Government-approved Site Operating Procedures issued by the CLC (E.g., BAM Construct and Wates) whilst Mace confirmed it plans to introduce a rolling, temporary one-week suspension of all site activity which will be reviewed regularly as the situation develops to understand what, if any, work can be carried out safely.
  • Demolition specialists Cantillon and De Group have set up a Contractors Appeal Campaign, calling on competitors and other industry groups to help source and deliver equipment such as masks, overalls, glasses and gloves for use by the NHS and emergency services, rather than let the equipment sit on shelves in warehouses. Meanwhile, JCB has re-opened one of its factories to join the nation’s effort to manufacture ventilators.
  • Materials firm Breedon announced that production has been temporarily been suspended at nearly all of its plants as the coronavirus outbreak impacts both demand and the ability to operate. Only its cement plant in Derbyshire will remain open in order to serve critical supply chains. The firm said that:

“Following the more stringent measures introduced by the UK government on 23 March, there has been an immediate and significant reduction in demand for our products which we expect to continue until restrictions on movement are relaxed.”

  • In light of market uncertainty arising from COVID-19, Balfour Beatty has decided to postpone its Annual General Meeting (AGM) which was due to be held on 14 May 2020. This means that its proposed final dividend for 2019 of 4.3 pence per share will not be able to be approved by shareholders and will also be postponed. Although the group said it was in a strong financial position, the Board said it would keep the appropriateness of paying the final dividend under review until the rescheduled AGM, with a final decision dependant on the prevailing circumstances at the time.

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