UK Market Overview
- UK construction industry has been heavily impacted by COVID-19 uncertainty. The question on everyone's mind is when will we return to pre-COVID levels. It's likely to be different times for different regions.
- Some glimmers of hope e.g HIS Markit/CIPS UK Construction Total Activity Index showing growth in August and September, but a lot of projects/activity related to this will have been planned before the pandemic.
- Forecasting a 12.9% contraction in UK GDP in 2020 followed by 11.8% growth in 2021.
- By 2022, the value of the underlying project starts is forecast to total £52.4 billion, just 1% below 2019 levels.
- Covid-19: The pandemic has had a major impact on the UK economy and it is likely to continue into 2021; the effect will be uneven and polarised.
- Brexit: Significant uncertainty remains for the UK, especially if we have a ‘hard’ exit. However, bringing an end to over four years of uncertainty should go far in improving overall business sentiment.
- A longer-lived shock, or a ragged ‘W’ shape to the recovery, as lockdowns are re-imposed, is a greater risk to our baseline than a ‘V’ shaped recovery.
- The Government promise to “build build build” will help the industry’s recovery.
- There is also an opportunity for investment for those willing to look at the longer-term picture.
- Modern methods of construction and digitisation driving efficiency and modernisation of the industry, increasing predictability and quality of output.
- Investment from outside the EU – recent ONS data shows that UK migration levels were beginning to increase prior to COVID-19, driven by an increase in non-EU student arrivals, mainly from China and India.
- Tender opportunities have declined since COVID-19 outbreak and some clients are more wary of making decisions on their built assets or are moving forward with reduced schemes/feasibilities.
- Main contractors are facing competing factors of decreased demand in some sectors, but increased labour and materials costs.
- Only 6% of contractors who responded to our Autumn market survey said that social distancing measures had no effect on programme length - additional preliminaries costs for an extended duration and additional costs to comply with social distancing.
Key market trends
- The UK’s defence industry continues to make a major contribution to growth and prosperity in every part of the country.
- The full economic impact of COVID-19 is not yet known, defence firms should monitor their supply chains for resilience and ensure cooperation and engagement among territories.
- Digitalisation, demand for faster research and development, emerging technologies, 5G, AI, cyber and biowarfare threats are upending conventional models.
- The construction industry showed resilience and collaboration to build Nightingale hospitals to help ‘protect the NHS’ in the wake of COVID-19.
- Healthcare continues to be a strong area of growth with large amounts of Government funding.
- The Procure 2020 framework is being advanced which will be a six-year regional and national framework, with as much as £20bn of approved projects.
- Opportunities for private and public healthcare projects to help rejuvenate town and city centres, also assisting with the accessibility and efficiency of services.
- Although energy consumption has reduced as a result of COVID-19, the sector remains busy and an area of growth, particularly due to nuclear decommissioning and the nuclear waste legacy.
- The Government is expected to issue the Energy White Paper, Heat Strategy and Buildings Strategy in the coming months, setting out the UK’s future plans in regard to energy and aligning with 2050 Net Zero carbon targets.
- The Paper is expected to clarify the desired energy mix incorporating low carbon technologies such as tidal lagoons, geothermal and on/offshore wind, as well as new nuclear power, both large scale new build and small modular reactors, also carbon capture and storage, and how generators and end-users reap the benefits as energy systems shift in line with electrification and digitisation.
- The UK faces an unprecedented double hit from the effects of Brexit and at least two coronavirus lockdowns. We are expecting major projects to be rolled out to help kickstart the UK economy back into full health.
- £600 billion is to be spent on UK infrastructure by the middle of 2025. This is the biggest spending commitment since the mid-1950s.
- New digital technologies are being developed to enhance the passenger journey while keeping the environmental agenda in mind.
- Fast and dependable transport is key for competitiveness and long-term growth globally.
- Urbanisation and connectivity are driving the agenda and countries are trying to find the right balance between modes of transport.
- Government announcement in June to bring forward £5bn of infrastructure and spending will give much-needed support to the construction industry.
- MMC expected to be used to delivery many schemes enabling the benefits of investment to felt sooner.
- DfE announced a large offsite schools framework in January with a strong pipeline and lessons learnt from offsite school construction is being used for the delivery of 10,000 prison spaces.
UK Office overview
Ahead of the programme and under budget, the £350 million Grange University Hospital (GUH) in Gwent, South Wales has recently opened and playing a vital part in Aneurin Bevan University Health Board's preparations to tackle coronavirus in Wales.
Through collaboration with stakeholders and the application of modern methods of construction, we were able to reduce the programme duration, costs, labour requirement and also health and safety risks whilst increasing the quality of workmanship.
The Defence Infrastructure Organisation has awarded Gleeds with the Cost Price Analytical Capability (CPAC) contract. The contract will make DIO a more intelligent customer when costing infrastructure programmes and will help them make better-informed investment decisions.
Our appointment will change the DIO's existing working methods, helping to provide better forecasts of costs, obtain better performance data from DIO suppliers, improve existing cost estimating abilities and ensure that DIO makes better-informed investment decisions.
Perfect Circle – a company jointly owned by Pick Everard, Gleeds and AECOM – has been awarded the two lots across the SCAPE Consultancy framework, which runs from January 2021 until 2025, with the option of a two-year extension.
Following on from the success of leading the SCAPE Built Environment Consultancy Services (BECS) framework for the past four years, Perfect Circle will be delivering:
- SCAPE Consultancy, Built Environment (valued at £350m), which will include surveying and design, project management, and quantity surveying for new projects and current assets.
- SCAPE Consultancy, Infrastructure (valued at £250m), which will provide dedicated consultancy services to support the design, delivery, and maintenance of infrastructure.
Gleeds has worked in partnership with INOVYN (INEOS) at Runcorn for over 30 years across a number of new build and maintenance projects.
Our team of dedicated consultants were responsible for managing the cost and contracts associated with Runcorn’s £5m a year shutdown and turnaround programme and achieved efficiency savings of 80%.
Because of your support and adaptability, the NHSBSA has managed to remain fully operational and more importantly, to stand up over 30 new services directly to the NHS Front line to help keep the country safe during this pandemic. Tom Kennedy - Project and Workplace Manager, NHSBSA