The construction sector, with housebuilding such a key component, has been plunged into confusion by the lockdown measures imposed by the government yesterday.
Secretary of State for Housing Robert Jenrick tweeted last night: “‘Advice for the housing, construction and building maintenance industries: If you can work from home do. If you are working on site, you can continue to do. But follow Public Health England guidance on social distancing.”
This prompted a ShutTheSites hashtag to trend on the social media platform and while housebuilders and the new build supply are acutely aware of health and safety at the best of times and committed to following government guidance, closure of sites, without being compelled by government to do so, throws up all sorts of employment issues – especially in an industry with such a high percentage of self-employed sub-contractors whose financial protection in the face of lost work is far from clear.
The uncertainty is further compounded by the fear of Liquidated and Ascertained Damages (LADs) and penalties for delays and contract breaches.
However major housebuilders are already taking unilateral action with the likes of Barratt, Taylor Wimpey, Hill and Galliard Homes announcing site closures today.
“We have taken the decision to temporarily close our 400 offices and sites across the country. We are in the process of doing this safety and securely as quickly as possible,” read a Barratt statement.
Hill announced that government guidance, exacerbated by Jenrick’s tweet, remained unclear. “We are strongly of the opinion we have reached the moral and practical point at which it is no longer possible for us to continue to operate the business in the usual manner.”
London developer Galliard said it was not just the health and safety of its on-site staff, but its action removes around 2,500 construction workers from the capital’s transport network, while stressing the company, which employs more than 3,000 people, remains very much open for business with its sales function remaining operational and continuing to market around 1,000 homes across London.
Stephen Conway, Chairman of Galliard Homes
“Our business was born in London and we are committed to the capital, but during these unprecedented times the safety of our construction staff, families and our London communities is paramount and we believe that by taking our staff out of daily commuting we will help to free up London’s Transport Network for the NHS and key workers who are protecting sick and vulnerable people across the capital,” said Stephen Conway, executive chairman of Galliard.
“Supporting the NHS and protecting lives is the sole priority at present, our teams can return to helping build our great capital when this crisis abates.”
Site closures will naturally massively impact the supply chain. The Construction Products Association (CPA) has a membership of around 20,000 companies, from large multi-nationals to SME members of its trade associations. The CPA represents around 85% (by value) of the £61.2bn construction products manufacturing industry.
Rebecca Larkin, senior economist at the CPA, said there was still very little hard data to feed through the system in terms of any firm forecasting – not to mention factoring in an ever-changing landscape in terms of the spread of the coronavirus and government’s ongoing response to it.
“History tells us downfalls are sharp and that housebuilders react quickly to market conditions. There is also the element of consumer confidence and job security when households are dealing with a big ticket purchase,” said Larkin.
Rebecca Larkin
The construction sector is further compromised by the high number of self-employed workers, especially in the finishing trades.
Larkin says to anticipate a 4% to 6% fall in GDP in 2020, but it could be more, mirroring the impact of the last financial crisis. Construction in the UK represents 8% of GDP and 10% of employment.
“In such circumstances construction falls deep and housebuilding even deeper, but tends to recover quite sharply.”
While recessions caused by ‘traditional’ economic and geo-political factors are easier to read with research and history to reference, the sheer scale, unpredictability and uniqueness of COVID-19 means the likes of the CPA has to look at likely scenarios rather than firm forecasts, while continually tracking and interpreting government policy.
“In the light of the pandemic, could the recovery be longer and shallower in the wake of jobs losses and consumers not spending?”
Larkin says the construction industry imports around 25% of materials, machinery and components, of which 16% comes from China.
Taking into account shipments with 30 to 40 days lead times, lockdowns abroad, ahead of the UK, will only start impacting now. Meanwhile Italy, France and Spain account for about 5% each of construction imports, so again there will be a time lag before the scale of the impact of the supply chain can be calculated.
The CPA is part of an industry collaboration currently providing daily briefings, along with the Association for Consultancy & Engineering, Build UK, Chartered Institute of Building, Construction Industry Training Board, Civil Engineering Contractors Association, Federation of Master Builders and Institution of Civil Engineers.
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