Roadmap to Recovery: How the construction industry can bounce back from Coronavirus uncertainty
by Michael Parry, Director GCS Associates - Specialist Recruitment to the Construction Supply Chain (www.gcsassociates.com
7 October 2020
The impacts of the Coronavirus crisis have been profound and wide-ranging, but almost nowhere have the economic repercussions been felt more keenly than in the UK’s vitally important construction industry. Since the initial introduction of lockdown measures in March 2020, right through the ensuing slowdown and phased reopening of activities, the sector has gone above and beyond the call of duty to oﬀer its expertise and skills in the service of the national interest - whilst all the while having to mitigate against its own losses, and advocate for the assistance needed to ensure its own survival.
In the early days of the crisis, the Oﬃce of National Statistics reported that construction activity had fallen by 5.9% across the entire sector by the close of March.
In April, the Federation of Master Builders reported that 68% of their members had been forced to wind down activity,
with an estimated 91% of their projects aﬀected across the country. Meanwhile, the Builder’s Merchants Federation (BMF) reported a decline of 6.7% in sales between Q4 2019 and Q1 2020.
All told, the Construction Products Association estimates that construction output will fall by 25% in 2020,
with private housing and commercial construction accounting for a signiﬁcant majority of the work disrupted.
This has had a signiﬁcant impact on ﬁnancial forecasting for the sector. Arcadis, for example, has signiﬁcantly downgraded its tender price forecast,
publishing a revised growth estimate of 0%, and suggesting that housebuilding and commercial development will not return to growth until 2022 at the earliest.
Despite the starkness of these predictions, it is vital that the sector begins to implement strategies to enable a recovery to take place sooner rather than later. The health of the national economy is contingent on the health of the construction sector - according to the Construction Leadership Council (CLC), construction accounted for £413bn of the nation’s GDP (8.6%)
in 2018. In that year alone, this was four times greater than the output of the aerospace and automotive industries put together. As Building editor Chloe McCulloch explains, ‘getting Britain building again is going to be one of the ways Boris Johnson’s administration moves an economy that is set to shrink at an alarming rate to one that starts to grow again.’
In light of this, the results of a recent Building survey which indicated that as many as 80% of construction ﬁrms have not yet ﬁnalised their post-Covid recovery plans make for stark reading. As the CLC has identiﬁed, failure to introduce a robust blueprint for the rehabilitation of the industry could have catastrophic results, risking a lapse into ‘a longer term recession, which erodes capability and skills, and leaves a smaller, weaker sector as a legacy.’
The importance of putting into place a clear and comprehensive set of guidelines to enable a post-Covid bounce-back is therefore paramount. The CLC itself has recently published its own Roadmap To Recovery document,
which lays out a three part plan for safely and eﬀectively reactivating the construction ecosystem.
The ﬁrst three months comprises the Restart stage, which aims for work to resume on as many sites as possi-ble in accordance with Government guidelines, maximise employment in the sector, and resolve contractual disputes arising from the lockdown wherever possible. This is followed by the nine-month Reset stage, which will look to resolve supply chain issues and invest in new working procedures to maximise production going forward. Finally, the year-long Reinvent stage aims to extract positive outcomes from the Coronavirus disrup-tion wherever possible, by using it as a catalyst for long-term innovation; leveraging digital, online, and manu-facturing technologies to deliver low-carbon, sustainable, and better quality outcomes and outputs across the industry.
The eﬀort has to begin with the restarting of construction activities simply because this is the most eﬀective way to kickstart broader economic activity in the sector. It will allow for resumed cash ﬂow in the industry - but to achieve this, clear and comprehensive guidelines must be in place to ensure that all work is consistent with the strictures laid down by the government. Many of the key construction trade bodies have already oﬀered strong leadership in this regard; as early as April, Osborne had issued a free industry ‘Stop, Think!’ brieﬁng that focussed entirely on how to introduce Covid-compliant on-site protocols,
and the BMF have since produced Branch Operating Guidelines
to assist builders’ merchants in their eﬀorts to reopen safely.
In addition, the adequate provision of on-site test, track and trace services will naturally be crucial to ensuring that workers can return to projects with conﬁdence, and The Chartered Institute of Building (CIOB) has already called on the Government to set up testing stations
on major construction sites around the UK so that any possible outbreaks are tracked and traced as quickly as possible. As the CIOB points out, such an approach would also do a great deal to ‘help improve… trust in the sector,’ as it would enable the wider public to ‘be sure that construction is doing everything it can to keep the virus under control.
The CLC also recommends a phased movement away from reliance on HMRC’s Job Retention Scheme (JRS), together with the development of distance learning tools to ensure that apprentices can continue their studies during the time that they are unable to train in the workplace.
Both these measures will help to ensure that the construction industry workforce can be mobilised and brought back into work as swiftly as possible for a speedy recovery.
Whilst getting personnel back onto sites is clearly essential, it is equally important that steps are taken to regenerate, secure and protect the supply chain. Simon Rawlinson, head of strategic research at Arcadis,
has highlighted ‘the resilience of supply chains’ as a major risk to business recovery. In addition to measures designed to stimulate demand and create a robust pipeline across infrastructure, it is crucial that contractual disputes are avoided wherever possible to minimise disruption. To this end, the CLC’s Reset Stage recommends that both public and private sector clients commit to following their guidance on responsible contractual behaviour,
and consider adoption of the Conﬂict Avoidance Pledge
to avoid disputes and, where needed, to seek adjudication through the most cost-eﬀective process.
The CLC’s Reset Stage also incorporates a number of ﬁnancial proposals to help compensate for the loss of productivity in early-to-mid 2020. It proposes delaying the implementation of the reverse VAT charge
until 1st October 2021. It also suggests extending the physical completion date deadline for house purchases that qualify for support under the Help to Buy scheme, to help prop up the housing market, and calls for the government to commit £4bn of the non-ACM Building Safety Fund
to the 2017 Housing Guarantees programme to support social housing, build-to-rent and SME housing delivery.
Ultimately however, the eﬀectiveness of any roadmap for recovery will be judged on how successfully it sets up the construction industry to thrive in a post-Covid world. Investment must be made into the research and development of digital technologies that will allow operators to function in this new landscape.
For example, Jonas Biörck, an associate partner at McKinsey’s,
has shown how the Covid crisis could exacerbate pre-existing problems in the labour market. ‘The industry faced a shortage of skilled labor before the crisis,’ he explains. ‘With the prospect of rolling physical-distancing measures and restrictions on cross-border movement of labour, skilled labour shortages will become even more acute. The case for digital tools that are proven to increase productivity, such as 4D simulation, digital workﬂow management, real-time progress tracking, and advanced schedule optimization, will become even stronger.’
Now is a time for boldly reimagining processes and procedures - shifting to remote ways of working where possible, whilst simultaneously developing tools to safeguard customer relationships. The CLC recommends that organisations commit to adopting and embedding emerging innovations from the Construction Innovation Hub. It also advocates a renewed focus on energy eﬃciency requirements, and a concerted push towards achieving a net zero and climate change resilient construction economy by 2050 by embedding these targets in planned new infrastructure and housing developments.
Finally, there is consensus across the industry that the manner in which the construction industry has pulled together to serve the national interest at this turbulent time demonstrates how successfully organisations can cooperate, and how eﬀective this coordinated activity can be. It is believed that a more collaborative attitude across the sector will pay dividends going forward.
Disruptive and costly though this crisis has undeniably been for the construction industry, the message of the BMF and the CLC is that opportunities will emerge from it if only we can prepare ourselves to take advantage of them. To do so, a robust roadmap needs to be in place - one that will allow the construction industry to return to work with conﬁdence, and begin the vital journey towards restimulating growth in the sector.