The latest CPA Construction Industry Scenarios (Summer 2020) have now been published which has three scenarios in a similar vein to the Spring Scenarios. In the CPA’s main construction scenario, a V-shape better described as a tick-shape recession and recovery, construction output is anticipated to fall by 20.6% during 2020 before recovery in 2021 during which construction output rises by 18.0% from a low base.
Overall, during the two years 2020 and 2021, the main scenario is similar to the CPA’s Spring main scenario. However, there has been a change in the monthly profile of activity that has led to an upward revision to construction output during 2020 and a downward revision to construction output in 2021.
Since the CPA’s last set of scenarios, activity appears to have returned to site quicker than initially anticipated as house builders focus on completing developments that were halted during the social distancing restrictions to feed pent-up demand that could not purchase between March and May. In addition, contractors also appear to have returned to site at a more rapid rate than expected in Spring as they are keen to finish partially completed projects given contractual requirements. The key exception to this has been in Scotland, which has different guidance on what construction could occur throughout April and May. In addition, the phased return to activity on site has led to a considerably slower recovery in activity, starting in June.
The anecdotal indications were that productivity on site had initially fallen by between 30% and 40%, dependent on the development, due to social distancing and other safety measures. This was expected to hinder project delivery, raising the cost and causing substantial delays to finishing dates. The indications from contractors in July were that productivity on site is no longer 30%-40% lower than pre-coronavirus as indicated in May although this productivity deficit has not fallen to zero at the time of writing and anecdotally remains 10%-15% lower depending on the site. In the Spring main scenario, some social distancing restrictions and other safety measures were assumed to continue into 2021 and, as result, it was expected that it would take longer to address productivity issues on site.
The CPA main scenario anticipates construction output in 2020 falling by 20.6%. It is worth keeping in mind that based on the ONS construction output data so far, to May, even if output were to rise to pre-COVID-19 levels in July and remain at those levels for the rest of the year, which is a very optimistic assumption then overall for 2020, construction output would still be 17% lower than in 2019.
The largest falls in activity are expected in in private housing (-33.3%), public housing (-32.5%) and commercial (-28.5%). The key changes in the main scenario since the Spring publication are a downgrade to public housing and an upgrade to private housing rm&i.
The CPA main scenario anticipates construction output in 2021 rising 18.0% from a low base. The largest growth rates are expected to be in infrastructure (34.6%) and private housing (18.5%).
The CPA also has U-shaped and W-shaped scenarios, described in the document.