May 17, 2021

Construction activity sees growth in first quarter

News Article

The construction sector appears to be in promising shape with figures for the first quarter of 2021, released by the Construction Product Association (CPA), showing a healthy 13 per cent increase.

During the third lockdown, contractors working within the construction supply chain were permitted to continue working, which has resulted in much improved figures compared with 2020.

However, the CPA has forecast that the sector will not bounce back to its pre-Covid 2019 output until 2022.

It also warns that a number of potential risks could derail full recovery, highlighting potential problems which could affect building material imports.

According to the CPA, construction output is forecast to rise by 12.9 per cent in 2021 and 5.2 per cent in 2022.

Meanwhile, infrastructure output is expected to rise by a record 29.3 per cent in 2021. The increase is due in large part to major projects such as HS2 and long-term utilities frameworks.

In the residential property sector, the package of measures announce by the Chancellor in his spring Budget – including extensions to the stamp duty holiday, help to buy, mortgage guarantee and job support schemes  –  are expected to boost demand.

Noble Francis, the CPA’s Economics Director, said: “Whilst outlook is largely positive, the recovery in commercial – the third-largest construction sector – is expected to be muted given a lack of major investment in new projects, particularly in central London. Questions remain over future demand of commercial space, particularly in offices and retail, which may be converted into residential or warehousing and logistics, if homeworking and online spending persists in the long-term.

“More notably, however, there are significant risks to the recovery in the form of supply constraints in terms of extended lead times and sharp rises in costs for vital imported products such as paints and varnishes, timber, roofing materials, copper, steel and polymers. This may hinder the ability of construction activity to increase in line with our forecast. Furthermore, concerns remain whether the high levels of demand for housing new build and rm&i can be maintained after the government stimulus and policy measures end on 30 September, particularly the furloughing and self-employment income schemes and stamp duty holiday.”

Palmers Solicitors’ Director and Head of Construction Law, Adam Davis, said: “The latest forecast is encouraging news for the construction sector but, as projects continue to ramp up throughout 2021, it is more important than ever to ensure that robust contracts are in place which provide protection in the event that outside factors cause unexpected supply chain delays.

“Our experience in working with the construction and engineering sector means we are ideally placed to provide independent, practical advice to help firms with their contracts.”

For help and support on contract submissions and project delivery compliance, please contact Palmers specialist construction team.