Glenigan’s excellent reporting and industry analysis makes for essential reading for anyone involved in construction. Their forecast for 2021 and the associated webinar (streamed live on 10th November) were instructive and interesting. Unfortunately, the webinar treated the UK as a homogeneous mass, ignoring the fact that in the early stages of the pandemic Scotland, unlike England, did not allow construction firms to work outdoors during the first lockdown. Similarly, when it came to public infrastructure, their focus was on shovel-ready projects such as Hinkley, HS2 and the Thames Tideway – all south of the border.
However, these are minor gripes: overall their analysis, while probably no surprise to anyone who has kept a weather eye on the macroeconomic situation, was pretty much as I’d expected. Crucially, it was realistic but positive. While I’m no fan of blind optimism (we’ve seen rather too many variations on “it will all be over by Christmas”), construction has actually fared better than was expected at the outset of lockdown.
The day before the webinar we heard the announcement of the 90% effectiveness of the Pfizer vaccine. Although governments are rushing to dampen expectations, fearing, no doubt, that people will think we’re now through the worst, I am hopeful that we’ll see a huge swing in business sentiment in the first six months of the new year, especially if more vaccines are successfully verified and rolled-out.
However, to return to the Glenigan research, I think one of the most important points they make is that the construction industry is going to have to build on some shifting economic sands over the next two years. More specifically, areas which were previously looking buoyant, such as university accommodation, are now in retreat as HE realises that bricks and mortar are not quite as important for Gen Z as they were for the baby boomers. Learning by Zoom is here to stay. Similarly, the office/property market is expected to weaken further in 2021, as will hospitality and retail – all victims of the change to WFH. Conversely, logistics and warehousing construction will grow, for the same reasons.
Glenigan says that the current mini-boom in (private) housebuilding is likely to be short-lived, with home-owners prioritising other expenditure due to prevailing economic conditions. Whether the possibility of new vaccines will change that sentiment is hard to say, but overall their view is that after a 38% contraction this year, 2021 is likely to see growth of over 20% and a further 15% in 2022. However, social housing, apart from the aforementioned student housing market, is likely to do slightly better, with 23% growth in 2021.
In general, the projections for the next two years were positive, with construction expected to grow by 17% in 2021 and 9% in 2022. The composition of market will be different, with the public sector to the fore, and the structural changes to the economy (offices, WFH, etc.) will be major drivers of change.
Chris Peace, MD, Peace Recruitment.
If you want to read the full report, follow this link.