UK Construction Intelligence Report Q1 2021

Max Wilkes
2021 follows an eventful year; with two prominent subjects that remained a constant – COVID-19 and Brexit, both of which have contributed greatly to this quarter’s report. The global pandemic has not only affected day to day life and routines but will also leave a scar on our economy for many years to come.

The latest estimate shows that the Covid-19 pandemic saw a 9.9% drop in UK GDP in 2020, however the construction sector assisted by being able to continue to work only fell by -3.4%. How this will shape post-pandemic recovery going forward?

Our Q1 2021 Construction Intelligence Report provides information on economic repercussions to overcome following the pandemic, the UK/EU Trade Agreement, trends in 2021, and construction inflation. As well as this we will be providing comment around the new challenges we face with reaching net zero carbon emissions, the implementation of modern methods of construction and how we can include social values in the tendering process.

Please click here to view our report in full.

Key outputs

  • The latest estimate is that the Covid-19 pandemic saw a 9.9% drop in UK GDP in 2020, however the construction sector assisted by being able to continue to work only fell by -3.4%
  • The Office for Budget Responsibility forecast for GDP is a -4% drop in the first quarter of 2021, leading to the first “double dip” recession before the economic recovery begins and sees an increase of 4% this year followed by a 7.3% increase in 2022.
  • Tender prices are anticipated to remain flat this year as contractors balance the need to secure work against material price increases.
  • The construction sector will face the prospect of labour shortages with many EU workers having already departed the UK.
  • The government has announced the creation of a new UK Infrastructure Bank to be set up to part fund alongside the private sector for new infrastructure work but the sector needs a pipeline of new work coming through to avoid mass unemployment, insolvencies, and aggressive tendering.

UK/EU Trade Agreement

  • The UK & EU secured a free trade agreement in December 2020. The result of this is a predicted long-term loss of -4% on the UK GDP.
  • As a result of taking back our borders it is suggested that there is a shortfall of 140,000 construction workers below the level needed for the output required. It is estimated that up to 15% of the construction labour force is of non-UK citizens raising to 35% of London’s construction workforce coming from EU countries.
  • The new points-based immigration system, with an emphasis on attracting higher paid professionals or where skills are known to be missing is likely to exclude roles such general labourers and lower paid jobs.
  • It is estimated that between 20 – 25% of all construction materials and products are sourced from overseas with the EU providing two thirds of the total amount. However, the trade agreement has introduced the need for customs declarations when importing or exporting which will cause delays caused by extra checks and expense because of the additional administration
  • The deal allows for the recognition of current EU standards under the term “designated standards”. Going forward it should not be presumed that any imported goods will automatically meet the requirements set down by British Standards

Construction Recovery

  • The latest ONS figures record the construction output at around 95% of the pre pandemic levels.
  • The recovery has been led by residential, assisted by the suspension of stamp duty which will be phased out in the autumn.
  • It is anticipated that infrastructure will then take the lead with small projects and highways before the roll out of large-scale projects such as HS2.
  • All sectors will experience growth, albeit at differing rates.

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