Forecasting in a Covid Climate
If there’s one thing we can say with certainty about the rest of 2021, it’s that those in the construction market forecasting game are going to have a tough year. Models and trends only take you so far when everything can change in the blink of an eye.
The fact is that nothing like the COVID-19 pandemic has happened before. The closest analogy, the “Spanish” flu of 1918, was in a very different time. And even though industry and science have had more than a year to come to terms with this coronavirus, events in India have shown us that nothing can be taken for granted when you’re dealing with a virus that’s as transmissible and prone to mutations as this one is.
And because of the huge effect on the way we live that COVID-19 has brought, the nation is still lacking data about the effect Brexit has had, and will have, on imports, exports, immigration and the economy as a whole.
But forecast we must. We’ve been poring over the statistics and tuning into every government announcement for our 2021 Q1 Deep Insights Report for the construction industry. There are some signs of movement – some positive, others negative – and with the obvious caveat that everything can change with the emergence of a mutation or even a cure, here are the main talking points for construction in the near future.
Population stagnation – or even decline?
Forecasting population growth for the UK has been relatively reliable for the past 10–15 years: it was growing, with around 190,000 net immigration per year. But with stricter immigration controls expected post-Brexit, it’s now thought that the population might actually start falling.
Again, COVID-19 throws a spanner in the forecasting works. Some citizens of nations other than the UK went back to their home nations as furlough struck. Will they come back? It remains to be seen, but the ONS has downgraded its former population growth forecasts dramatically.
In terms of construction, that means much more than housing – schools, hospitals, industry, retail and transportation may be expected to suffer a squeeze in demand.
Ports linked to warehousing demand
Again, the pandemic clouds any means of comparing port traffic pre- and post-Brexit, but hauliers may be generally still wary about potential delays caused by paperwork and red tape at the borders.
So who is picking up the slack? Warehousing. With goods subject to checks and bottlenecks predicted at peak periods, manufactured goods being exported need to be stored for longer, and that has resulted in a dramatic growth in contracts for warehousing, as we detail in the report.
Government support is continuing
The more optimistic hopes throughout lots of the population for a quick resolution to COVID in the spring and summer of 2020 have largely been dealt a reality check, and a more cautious approach is signalled. With emergency government support measures continuing until at least autumn, businesses can now see a cautiously optimistic way through the pandemic, with forecasts somewhere on the positive side of their own worst cases.
That will hopefully mean investment, and for construction to be swept along with the wave as frozen building and expansion plans are allowed to get the green light.
Major infrastructure projects are a massive part of the construction industry, particularly civil engineering. After the infrastructure-led early recovery to the pandemic throughout much of 2020, there has so far been a dip in public spending on infrastructure during the end of 2020 and start of 2021.
Whether this is a long-term strategy remains to be seen, but the industry will need to pay close attention to infrastructure activity in the coming months.
Cash in pocket
Although GDP has taken a hit – and bounced much of the way back – unemployment is another metric that has not been hit with the catastrophic levels feared when the severity of the virus first became clear. According to the ONS, unemployment is hovering around 5%, up from about 4% before the pandemic.
Furlough seems to be doing its job, but it’s worth noting that not all industries have suffered equally, as we wrote in our last blog. Indeed, some have thrived, and many have kept an even keel. Clearly, hospitality and travel are the biggest victims, but they could see a monumental boom once it’s all over.
It’s not just that people are desperate to get out. Many employees, with little to spend their disposable income on, have saved unprecedented amounts of money. With a slight drag caused by a hangover of caution, the overwhelming feeling is that pubs, cafes, restaurants, hotels, cinemas, theatres, sports venues and all connected industries like taxis will be turning people away.
We’ve recently seen pilots of nightclubs and concerts in Liverpool and the World Snooker Championship final in Sheffield having a capacity crowd. The strict testing regimes in place have, on first impression, been successful, and could show another path back to normality as long as the public are willing to go along with it.
Of course, those of us whose nightclubbing days are over might look elsewhere to invest our saved cash. This is also good news for builders, who can hope for full order books when restrictions are lifted and people are once again feeling confident enough to dip into their savings on major home improvement projects.
Steady growth with a pinch of caution
Overall, there is cause for optimism, with a nod towards staying cautious for any sudden changes that may come about. The need to stay alert in these turbulent times is why it has never been more important to stay informed about projects in the pipeline so that construction firms get a head start on the competition.
One cause for concern is that nobody really knows if a vaccine-evading mutation will send us back to 2019 again, although experts say that the pharmaceutical industry is well prepared to tweak the vaccine to address any such changes.
But with all considered, there can be optimism that the worst is hopefully behind us. Going the final mile will need public buy-in, appropriate governmental assistance and a close eye on the science. We’re all #ReadytoGrow and we’re looking forward to the industry moving forward together as soon as possible.