How will the recession affect the construction industry?
We are now living in a world where the word ‘unprecedented’ is used on a daily basis. It is commonplace in conversations describing the state of the country, the pandemic, and the economy. The uncertainty that almost every sector of business has felt since the early part of the year is itself unprecedented, as the pandemic has gripped every corner of the earth.
As lockdown slowed the economy almost to a standstill, we now find ourselves in the midst of a recession. This spells bad news for our construction industry, which was starting to pick up slightly as builders returned to work after they were forced to stay at home for many weeks in the first half of the year.
As the furlough scheme enters its last couple of months, unemployment is set to rise in the aftermath as companies struggle to get back on their feet. For the construction industry, private housing is set to be the hardest hit, with a 42% contraction in production. Falling incomes will see consumers unwilling to commit to large purchases, or loan repayments to finance them. This in turn will slow the demand for house purchasing and large scale home improvements and will prevent them from bouncing back as quickly as other consumer spending areas.
Much of the activity we see now on building sites is largely focussed on building that is already reserved or near to completion.
In the commercial sector, retail is already on its knees. High street and town centre redevelopment are slowing as footfall diminished over lockdown. Although the hospitality sector is striving to get back to normal, online spending has meant the need for high street shopping has decreased. Office space is no longer the sought after commodity that it once was as British work forces are taking a more flexible approach to home working.
One thing is sure; if the government wants to achieve its target of building 300,000 new homes per year, changes (and a large boost) will be needed. New campaign group, Housing Diversification, would like to see the Help to Buy scheme extended to include custom and self-build homes, plus investment in more small site work, using smaller building firms where local authorities engage with developers. This would enable development to grow at a sustainable level as small to medium sized housebuilders tend to build on smaller sites in existing communities.
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