28Th April 2020 Construction Update 780 Px External Overview

Work resumes on 10% of sites initially suspended at lockdown

28Th April 2020 Construction Update 780 Px External Overview2

CONSTRUCTION

  • Barbour ABI has said that work has now resumed on 10% of sites that were initially suspended at the outset of the lockdown. The worst affected sector – private housing – is showing signs that activity is picking up. Redrow plans to join the likes of Persimmon, Taylor Wimpey and Vistry in re-opening mothballed sites. Announcing a return to work on 11th May with phased construction starting a week later, the firm said:

“We have developed rigorous social distancing protocols that will be supported by strict arrangements to ensure they are consistently applied. In particular, we will have an e-learning module for all Redrow employees, induction videos for contractors, appointed covid supervisors for each site and enhanced signage and PPE.”

Barbour ABI also said that it has seen a large increase in the number of projects confirmed as remaining open, from £3.5bn last week to £13.5bn currently.

  • Trade body Build UK is in talks with the Local Government Association to extend permitted site working hours and use empty hotel rooms for workers living away from home. As more contractors begin limited site reopening’s, firms are hoping to pull back some lost time caused by site closures and improve productivity while new site protocols are in place. Staggering start times will also help reduce pressure on the public transport network.
  • The RICS’ Q1 2020 UK Construction and Infrastructure Market Survey shows that workloads have fallen into negative territory for the first time since 2012. The headline workloads indicator fell from +12% in Q4 2019 to -3% in Q1 2020, pointing to virtually no change in activity in the first quarter of the year. Workloads slipped across all market segments in Q1 2020 apart from the infrastructure sector and other public works sectors, where contributors reported a modest rise in output. Looking forwards, the majority of respondents now forecast falls in output, workloads, profit margins, as well as a decline in new hires in the coming year.
Total Workloads Graph
  • The Construction Leadership Council (CLC) is looking into how firms can get furloughed workers back as work on sites restart. To help the industry return to pre-coronavirus growth levels the CLC confirmed that it is looking at a recovery plan for the industry to release workers back in a phased manner. A high number of construction workers are thought to be on the Government's job retention scheme and there are concerns that during the recovery phase projects won’t be able to rebuild capacity and get back up and running quickly enough.
  • Proximity warning specialist SiteZone Safety has supplied six of its personnel distancing systems (PDS) to Interserve Construction to help enforce the so-called ‘two-metre rule’ of social distancing on the Birmingham NEC site. The workers on the makeshift field hospital have been issued with 2kg packs and a wearable detection ‘tag’ that can trigger a proximity alarm if workers get too close within the set boundaries. The intention is to reinforce social distancing, raise spatial awareness and effect behaviour change on site.
  • Builders' Merchant Travis Perkins, which furloughed approximately half of its 30,000 staff in the first three weeks of the lockdown, has said that trade in the same three week period was just one-third of what if had been during the same period in 2019. However, the merchant is beginning to open more branches. A round a third of its Merchanting branches and half of all Plumbing and Heating branches were operating. The majority of its Wickes and Toolstation branches also continue to trade.


CONTRACTOR NEWS

  • Of the 576 contracts awarded in March, 209 (or £1.2bn worth) have now been put on hold because of COVID-19 according to Barbour ABI. Three of the ten biggest jobs that were signed in March have been halted - Balfour Beatty’s £63m contract for Highways England to widen the A19, Lendlease’s £63m Camden Town Hall refurbishment and McLaughlin & Harvey’s £60m Alexander Stadium contract for the 2022 Commonwealth Games.
  • Ashford Borough Council’s first ever virtual planning meeting has given the green light to build a £250m film studios complex in Ashford’s derelict Newton Railway Works. The Grade II Listed building on the 15-acre site will be converted into 240,000 sq ft of TV and film production space as well as a media village, educational centre and hotel. Mark Quinn from Quinn Estates (one of the joint developers) said:

“The decision means we can collectively start to rebuild the industry, jobs and momentum temporarily lost as a result of what has been happening globally.”

HS2’s £570m Curzon Street station in Birmingham was also given planning approval by the council’s planning committee during its first virtual planning meeting last week.

  • The Battersea Power Station Development Company is targeting to restart work by mid-May. Four weeks ago the developer said that it would review its position on re-opening the site on 17th April and, if deemed appropriate to re-open, main site works would recommence on 27th April. However, re-opening the site has been pushed back and will be conditional on ensuring that site operating procedures and social distancing rules can be implemented.
  • Highways England has signed a £4.5bn, 10-year framework deal with six companies (including Costain and Balfour Beatty Civil Engineering) to design and construct the future smart motorway programme. The framework will see the installation of board gantries and the removal of motorway hard shoulders to install all-lane running. A spokesman from Highways England said:

“The framework will enable the industry to put greater emphasis on the standardised design, so where there are common elements across a programme, such as gantries and variable message signs, they can be produced and can be ordered ‘off the shelf’.

  • After just a one week temporary closure, Legal & General has re-opened its modular housing factory near Leeds. Despite work at all its other housing businesses being put on hold, in its first quarter update L&G said that it was planning to raise money in order to take advantage of new business opportunities in the current environment.


COMMODITIES & MATERIALS

  • Brick manufacturer Forterra has joined Michelmarsh and Ibstock in restarting production. Risk assessments are being carried out prior to firing up its kilns at one its manufacturing facilities this week. Working practices have been drawn up which will ensure staff are able to adhere to social distancing rules. Two more plants will open in May and the majority of its 18 plants will be open by July to help support its housebuilding customers, ramping up production as and when inventory and demand from the market requires.
  • Ongoing reports of supply issues for construction materials and products have prompted Build UK to launch a survey where respondents can provide information on what materials and products are required and in what quantities. The survey is seeking to demonstrate current levels of demand so that it can work with manufacturers, suppliers, distributors and merchants to help open up the supply chain.
  • Tata Steel, the owner of Port Talbot steelworks, has approached the UK Government for a £500m commercial loan that would be repayable when demand for steel from its sites in Wales recovers. The manufacturer has been hit by a slump in global demand as orders from carmakers, manufacturers and the construction industry have fallen. Despite the fall in demand, iron ore prices have held up relatively well during the pandemic due to supply disruptions, which has added to Tata Steel’s difficulties.


UK ECONOMY

  • In its Spring Forecast the EY Item Club has downgraded its near-term outlook for the UK economy. GDP is expected to contract by 6.8% in 2020, predicting a deep but short recession this year due to the impact of COVID-19. Positive growth is then expected to return in 2021 with the Club forecasting a 4.5% annual growth rate. However, its forecasts assume that some of the lockdown restrictions will be eased in May, with even more in June. The report noted that the substantial fiscal and monetary stimulus will help support activity once the impact of COVID-19 starts to wane.
  • The preliminary Flash UK Composite PMI by IHS Markit/CIPS shows that activity is expected to contract even further in April and fall to a record low of 12.9 (from 36.0 in March) - consistent with a quarterly fall in GDP of 7%. The poor survey readings will inevitably have many questioning the cost of the lockdown and how long the current containment measures will last.
  • Using data covering 85% of jobs posted online in the UK across 256 job sites, Reed, the recruitment group, said that new roles being advertised had dropped 43% in March 2020 compared to the same month in the previous year. This fall was 62% when comparing the first two weeks of April. The UK unemployment rate is expected to increase sharply as a result of the coronavirus lockdown with KPMG estimating that as many as 13m jobs, representing 36% of all jobs in the UK, are in sectors highly affected by the lockdown.


GLOBAL ECONOMY

  • The euro-area posted a 3.7% contraction in GDP during the first quarter of 2020. The contraction comes after seven years of growth and captures the early hit to the economy from shutdowns to contain the coronavirus. This weakness is likely to worsen in the second quarter, followed by a rebound in the final half of this year.
  • Construction machinery equipment makers in China have raised prices as sales begin to take off. Some of the country’s leading heavy equipment manufacturers have announced 5-10% price increases since sales hit a record high in March, when infrastructure construction activity rebounded. Some manufacturers have also asked workers to take weekend shifts in order to meet the growing demand and massive jumps in orders. The uptick in equipment in sales is a positive sign of a sustained recovery.
  • Cabinet Office minister Michael Gove has told MPs that the business turmoil caused by COVID-19 would not cause the Government to seek an extension to the UK’s post-Brexit transition period. With just two months to go until both the UK and EU take stock on whether a trade agreement is possible, Downing Street has said that there will need to be some political movement on the EU side. Mr Gove also said that a prolongation would require the UK to make a financial contribution to the EU budget and apply any new European laws “over which we would have no say”.

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STATE OF THE MARKET WEBINAR

Watch G&T Partner, Nick Rowe, discuss the impact of Covid-19 on construction sites, supply chains and future pipeline in New London Architecture’s State of the Market webinar. Other speakers were:

  • Alexander Jan, Chief Economist, Arup
  • Digby Flower, Chair UK & Ireland, Cushman & Wakefield
  • Yolande Barnes, Chair, Bartlett Real Estate Institute
  • Prof Tony Travers, Director, LSE London