WILL THE CONSTRUCTION BOUNCE BACK LAST?

The latest data from industry analysts Barbour ABI indicates the continued ‘V’ shaped recovery in construction with an 80.3% increase in the number of contract awards in July.

This is an increase in total value from £3.1bn in June to £6.3bn with residential and infrastructure accounting for 50% of the share of total contract awards.

The upturn is certainly sharper than most in the sector predicted and there is clear momentum from three consecutive months of growth. However, it’s still too early to predict with any certainty how steep or how long the incline will be.

The Government’s ‘build, build, build’ strategy puts construction at the centre of its plans for economic recovery, hoping to repeat the success of a similar approach in the wake of the second world war.

The question is whether the uncertainty of the wider economic outlook will put the brakes on the early momentum we are currently seeing.

The Construction Products Association predicts that output in the sector will fall by 20.6% in 2020 with doubts about longer term demand.  It identifies a fragility in long term confidence for new housing developments with the prospect of unemployment and signs of lender appetite worsening. Consumer confidence is impacting the commercial sector with shifts to e-commerce and homeworking that affect retail and city centre office development.

There are still huge unknowns around the impact of Brexit. The current negotiations show no sign of progress and the clock is ticking down towards the October deadline that the EU requires to ratify agreements with its 27 members by the end of the year.

Let’s not forget the potential for a second wave of infections in the autumn that could send the country back into lockdown and instantly reverse construction’s gains from the last three months.

Last year the construction sector’s output of £413bn was equivalent to 8.6% of GDP. It employs more than three million people. Continued growth in construction is crucial to the UK’s economy but there are still some significant potholes along the road to recovery.