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Takeaways from Glenigan’s UK construction industry forecast

Here at Refresh, we work with multiple construction companies who we’ve been advising through the pandemic, to ensure they pivot their strategies accordingly and maximise on the opportunities that are out there.

To help construction businesses better plan for the future, Glenigan recently revealed its sector predictions for the remainder of 2020 through to 2022.

Honing in on various predictions, while factoring in recently announced economic investments from the government, as well as the high degree of uncertainty facing the construction industry, the report lays out the forecast for the next two years, as well as prospective opportunities for the sector.

Since the report is quite detailed, we’ve pulled out the top six takeaways to be aware of. It is however worth noting that these are assumptions and could skew, given the continued uncertainty surrounding the pandemic and Brexit.

1. Reduced staffing to hamper pace, impacting future growth

Due to increased health and safety measures on sites and social distancing measures still firmly in place, staffing levels on sites remain reduced, meaning projects are being completed at a much slower pace than before. The second half of 2020 will focus on recovery, which will also likely impact growth for 2021 and 2022.

2. A ‘second-wave’ and the accompanying restrictions on activity avoided

We’ve already seen the government starting to implement local lockdowns, but Glenigan predicts there will not be another national lockdown. So, while some construction activity may come to a halt due to local restrictions, activity in other parts of the country will continue.

3. Weak growth, revenue disruption and confidence deter private sector investment in most non-residential sectors

The weak economy is expected to negatively affect the private sector, with workload declining across the board. Brexit is also likely to add more fuel to the fire from a manufacturing standpoint, with UK manufacturers having less favourable access to the EU single market, with potential interruption to EU supply chains. However, it’s not all doom and gloom, with warehouses and logistics spaces forecast to grow, thanks to the significant growth of online retail.

4. Rising unemployment and weak earnings slow the housing market

While the government has committed to combatting rising rates of unemployment due to COVID-19, there will still be some casualties which will of course have an impact on housing market growth. That said, there was a post-lockdown boom in housing transactions and while it’s unclear how long this is likely to last, we’re already starting to see new trends emerge. For instance, more buyers are considering locations they hadn’t previously and are open to moving further away from work, as companies transition to more of a work from home setup.

5. Increased public sector investment drives recovery in construction

The government has already committed to spending in various areas from new hospitals, schools and prisons, to road and rail, which will help limit the negative impact on the economy, as well as the construction sector, post-COVID and Brexit. 

6. Brexit transition period completed at the end of the year with a limited treaty in place, hampering exports and increasing UK manufacturers’ costs

This has been on the agenda for some time with businesses encouraged to prepare for increased costs. Manufacturers are also likely to face reduced access to EU markets and disrupted supply chains from 2021.

 

Additionally, below are some tips on how firms can embrace these forecasts from the report:

Focus on the best performing sectors in the market: sectors that were thriving pre-pandemic will not necessarily remain the same post-pandemic, so companies should consider pivoting on their strategy, if the areas they were focusing on have become somewhat redundant. Increased government funding will drive growth in the education, health, civil engineering, and community and amenity sectors. Structural changes are also expected to create new opportunities in warehousing and logistics, office refurbishment and the repurposing of disused commercial premises. On a more local scale, the north and midlands are set to outperform London and the South East.

Risk mitigation: companies should focus on mitigating risk with concerns around turnover and cashflow likely to continue to take precedence through the rest of 2020. This may result in delays in both pace and stage payments from clients. By spreading the workforce across more projects, contactors and sub-contractors can offset lower monthly revenues generated per site. This will also help reduce the business’ exposure to a financial crisis should any changes in payments arise. Supply chains should also be reviewed, particularly from overseas resources, due to COVID-19 and new trading arrangements in line with Brexit.

Working more efficiently: businesses should invest in design solutions and look to more efficient operating practices. They should also consider offsite manufacturing options that reduce the reliance on site labour, due to on-site restrictions around COVID-19 and the shrinking post-Brexit skills pool.

Embracing digital solutions: traditional ways of working have been disrupted by the pandemic. Where possible, businesses should invest in digital platforms such as effective CRM, digital marketing channels and a modernised salesforce to help identify and target emerging opportunities, sustain workload and improve efficiency, plus profitability.

If you’re looking to discuss the UK construction industry forecast with us in further detail or want help with your PR in this sector, drop us a line.

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