A COVID-19 update on the Construction industry

By Rebeccah Dowell, September 1st 2021

Following a significant number of lockdowns worldwide due to the COVID-19 pandemic, the construction industry has experienced a substantial amount of uncertainty due to a surge in costs, material shortages and more latterly exceptional levels of demand. By continuing to monitor the everchanging pandemic, Rushton International have produced the following context based on recent findings.

Impact of COVID-19 in the UK

The construction industry as a whole is derived of a huge variety of projects across many sectors ranging in scope and size, and whilst the majority of these are small to medium enterprises, the industry also covers large projects which involve a substantial amount of subsidiaries, and subcontractors.

According to PBC today, The 2021 building materials crisis explained as of June 2021, there remains a significant shortage of items within the UK such as electrical tools, steel and other various materials which is likely to continue for the foreseeable future due to issues caused from both the pandemic and Brexit; imported supplies have been delayed on their way to the UK.

In accordance with RICS, The true cost of COVID-19 to the global construction industry COVID-19 has led to constant supply chain disruptions across many different markets. Within the European construction industry and during the last 3 quarters of 2020, there was on average a decrease of 38% in profit margins and an increase of 30% in supply costs.

Why has there been an increase in supply costs?

  • A decrease in work has resulted in a rise in prices to cover short-term losses
  • Unprecedented levels of demand
  • Due to the increase in levels of demand, shipping costs have risen due to a shortage of containers.

As a result of an imbalanced supply and demand over the course of the pandemic, rates and purchasing prices have subsequently soared.

As lockdown restrictions are due to be lifted, economies look to build up construction organisations once again. RICS have specified how they aim to improve practice and confidence using a new global standard. The guideline is a regulated way to benchmark costs, quality, and performance for those who work within the industry.  More information on this topic can be found here: New cost prediction standard in construction markets.

Impact of COVID-19 overseas – An evaluation review from RICS 

After closing their borders to overseas travel as soon as COVID-19 became apparent, Australia have experienced very little impact towards the construction industry as trade has continued to operate as normal. However, as expenses sourcing these materials from their own economy has continued to soar, obtaining items from China as a cheaper supplier alone has created several issues for the country.

For China, spikes in COVID-19 cases have continued to rise throughout the first quarter of 2021 causing “mini-lockdowns” throughout the country. As a result of these lockdowns, both transportation and logistics have been affected by highway closures, causing many factories to noticeably be more cautious around the rate of production.

Additionally, the reduction of raw materials being imported from other countries has had an impact on supply and costs, resulting in materials such as low-iron glass increasing in price by 5-10%.

Summary

On account of the pandemic and the aftermath of Brexit, the UK has seen many problems within the construction industry resulting in a shortage of materials as well as an increase in costs. As a result of this, builders across the globe are now choosing to delay work until the necessary resources become available.

For Buildings, Civil Engineering, Civic Infrastructure and General Real Estate enquiries please contact;

Andrew Reed MSc MRICS MCABE 
Director and Head of Buildings
andrew.reed@rushton.co.uk
07904 974 964 

or

Gareth Williams BSc MRICS
Director
gareth.williams@rushton.co.uk
07788 188847

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About Rushton International

Rushton International is an independent and impartial asset valuation and advisory firm. We specialise in the valuation of plant, equipment and buildings for insurance purposes. With our team of qualified and accredited valuers, we have the experience, qualifications and expertise to value any asset, anywhere in the world.

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