G&T’s Market Update for October 2020 provides an overview of the London construction market. In light of the disruption caused by the coronavirus (COVID-19) pandemic and its impacts on the construction industry, the report highlights changes to key macro-economic indicators over the reporting period, as well as significant construction-specific metrics such as the UK Purchasing Managers’ Index, construction output, commercial and residential new orders, key material costs, trade package inflation and tender price trends and forecasts.
In this update we:
- Provide an overview of some of the key takeaways from Deloitte’s Summer 2020 London Office Crane Survey
- Analyse the ONS’ Business Impact of COVID-19 Survey (BCIS) Results in order to gain an insight into the impact of the pandemic on turnover and operating costs, as well as furloughing trends and construction vacancies
- Summarise some of the impacts that a no-deal Brexit could have on construction
Please note – whilst our Market Update uses the most recently published data at the time of writing, release schedules between data sets differ. This inevitably means that not all datasets will cover identical periods.
Following a 2.5% fall in Q1, the UK economy contracted by 19.8% in Q2 2020 as coronavirus-induced lockdowns hammered activity.
The second quarter plunge was the worst on record, with all sub-sectors (services, construction and production) seeing record quarterly falls, particularly in the sectors most exposed to Government restrictions.
However, economists expect a sharp rebound in Q3, fuelled by strong consumer spending. This has been reaffirmed by the most recent monthly GDP data which show three consecutive monthly increases to GDP (2.4% in May, 8.7% in June and 6.6% in July 2020). Growth is expected to have continued in August, putting an end to current technical recession.
Although on the path to recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic. The threat of a second wave of COVID-19 cases, no-deal Brexit and an anticipated sharp rise in unemployment could derail the recovery.
- In its Summer Forecast, the EY Item Club downgraded its outlook for the UK economy. The Club anticipates a 11.5% contraction in GDP in 2020 - a substantially deeper drop than the 8% fall that was anticipated in its early June Interim Forecast.
- However, the Club upgraded its expectations for 2021, anticipating that GDP will expand by 6.5%.
- Although some Government support schemes in their current form are coming to an end, the Government is considering new packages and measures to support jobs and growth.
- The Bank of England’s Monetary Policy Committee announced that the £745bn asset purchase programme will run to the end of the year and could potentially increase if the recovery lags.
- A trade deal between the UK and EU has yet to materialise which could mean an extended transition period or trade taking place between the UK and EU under World Trade Organisation (WTO) rules.
