Home Features UK construction industry to face headwinds as it recovers in 2021

Amandeep Bahra, economist at the Construction Products Association (CPA), confirms ongoing pandemic and post-Brexit challenges for our sector, advising that the need to swiftly adapt to new norms is critical for success.

AFTER a record fall of 14.3% in 2020, output in the UK construction industry is expected to increase 14% in 2021 under the CPA’s main scenario, which assumes a ‘W’-shaped economic recession and recovery (the so-called “double-dip”) with the second wave of infections and accompanying restrictions rolling into Q1.

Progress on vaccine rollout and some easing of lockdown restrictions would then support a sustained recovery from Q2.

However, beneath the surface, the pace of recovery will vary across sectors with commercial to see a muted one, due to a lack of projects in the short-term pipeline and the impact of the pandemic on the already struggling offices and retail sub-sectors.

Offices
The rise in homeworking during the pandemic has left many offices across the UK underutilised, and landlords and investors unsure about future occupier requirements. In the short-term, existing office space may need to be reconfigured to accommodate social distancing – which is still likely to remain in place, at least to some extent, for some months or adhered to voluntarily by individuals – as officebased staff start returning back to their workplaces after the economy reopens again from Q2. This suggests that more innovative approaches will be needed post-pandemic that provide more floor space per employee and that supports employee wellbeing through greater use of virus-resistant materials.

That said, flexible office space is also likely to be popular – whether it is in the form of co-working or smaller offices in suburban locations. The former may even become more popular if more flexible working arrangements keep people closer to home.

Beyond the short-term, the big question is whether homeworking will become the ‘new normal’? If so, this would call for a rethink of existing space that may be repurposed or converted into housing or logistics.

Retail
The ongoing structural trend towards e-commerce has been accelerated by the pandemic, as many people were forced to shop online amid the closure of non-essential stores during the lockdown periods. With online shopping habits on the rise and financial difficulties faced by retailers set to get worse in 2021, the conversion of existing retail premises into logistics space will certainly remain an option for many landlords.

Some pockets of opportunity may emerge within supermarkets, however, if discount retailers acquire distressed retail space and focus on fit-out.

Supply and demand
Despite the new UK-EU trade deal, Brexit uncertainty has not fully abated and will add to the woes faced by the commercial sector and the overall industry.

Under the new rules that came in to force from 1 January 2021, UK manufacturers are facing three different product markings that could raise overheads. New red tape and customs paperwork are also likely to cause delays at ports that could, in turn, trigger supply chain disruptions.

Timber, steel and white goods were already facing global supply issues in 2020 due to a surge in activity and DIY improvements post-lockdown across the world, and higher prices for these materials were reported by IHS Markit/CIPS and the Federation of Master Builders. Higher prices for raw materials used in many paints and coatings were also reported by the British Coatings Federation and in January, the trade association cited additional friction and costs linked to the new Brexit requirements for chemicals.

The new points-based immigration system built on job, salary and language requirements is also likely to hamper access to new entrants from Europe that are vital for delivering housing, fit-out and refurbishment projects.

As the industry faces these headwinds, the ability to adapt to new norms will be crucial for a sustained recovery.
www.constructionproducts.org.uk

 

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