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COVID-19 and the UK construction industry

COVID-19 is affecting the global economy in a way not witnessed since the 2008 economic recession. Market volatility is resulting in sudden movements across the major financial markets, as investors and traders alike react to the latest developments concerning the virus outbreak. As a result, COVID-19 is affecting the daily lives of those involved in almost every single industry, says Jamie Johnson, CEO of FJP Investment.

FJP Investment

Construction is, sadly, not impervious to this. The sector is concerned that their development projects are now in jeopardy as a result of potential labour shortages, building resource supply chains and parties being unable to honour their contractual arrangements due to factors entirely outside their control.

However, it is important to keep in mind both the resilience of the construction sector and the temporary nature of the current pandemic. Admittedly this public health crisis does come at a particularly frustrating time, given how 2020 was poised to be the year of the UK Government’s ‘housebuilding revolution’. Thankfully, the financial allocations for new builds that were outlined in Chancellor Rishi Sunak’s first budget show us that the Government has not overlooked the needs of the wider property market.

Support is being provided

In conjunction with the Government’s assurances, private membership organisations in the construction sector have been quick to offer assistance.

In a joint statement, both the Civil Engineering Contractors Association (CECA) and Build UK outlined what they are doing for their members to ensure minimal disruption to the industry – as well as their actions to certify that those who are eligible for UK Treasury tax relief are aware of it.

Much of their advice is simply imparting the World Health Organisation’s guidelines for organisations that continue to operate active worksites in the current public health climate. These include the desired ratio between employees and hygiene facilities for minimum contagion opportunities, how to review safety-critical elements of your project, and the importance of splitting your team up so that any infection risk can be contained to a select few should an outbreak occur.

The main concern is for those for whom COVID-19 represents a ‘force majeure’ event concerning their contractual obligations. As the go-to clause for those requiring contractual relief, one must demonstrate precisely how they are now unable to fulfil their duties, as well as how they had exhausted all precautions to avoid it.

For a virus that we know so little about, heeding these often-stringent requirements may pay a heavy toll on those already under pressure to adequately prepare for what this pandemic may bring.

This is why it is extremely positive to see that Build UK and CECA are providing clarity in such discussions by providing thorough information on force majeure and their relationship to COVID-19. By doing this, they are, in a sense, defining the legal nature of COVID-19 with regards to construction-related contractual obligations.

In addition to this, both bodies are also positioning themselves as the ‘go-between’ for firms needing Government assistance, whether it be for clarity on a public development project they have been commissioned for, or simply requesting the delaying of taxes for those whose cashflow has taken a hit.

The above examples demonstrate the general lobbying efforts that are being taken on behalf of the construction industry. The bigger questions are how can the Government truly show that it adequately values the construction industry and that it understands fully the present industry conditions that have been brought about as a result of the coronavirus?

Long-term challenges for Government

As previously stated, 2020 was set to be a year for celebrated levels of public-private partnership to end the UK’s housing crisis. After numerous years observing the issue’s neglect and witnessing successive short-lived housing ministers – Boris Johnson’s ambitious commitments on the number of new builds and the scale of the financing offered were heartily welcomed by industry professionals.

How can the Government ensure the industry’s stability in the coming months?

Ultimately, by providing financial assurances for those whose livelihoods were tied to construction projects. Business relief measures have already been put into place for many, ranging from business mortgage ‘holidays’ to business tax rate relief. The Government should introduce targeted measures to support the construction industry and provide assurance that those who fail to fulfil their contractual obligations through no fault of their own shall still be financially compensated.

Construction, and the UK property market generally, have previously demonstrated remarkable resilience during times of global economic shock, and I am confident it will continue to do so. From Build UK and CECA setting an example for how industry bodies can provide support for those affected, I am confident in the long-term growth prospects of the industry. Unlike other financial crises, we can be entirely sure that COVID-19 shall pass and normality shall return; and when it does, I look forward to construction playing an integral part of solving the critical lack of homes this country still faces.

Contact FJP Investment

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