UK market intelligence summer 2020: countering the impact of a pandemic
The COVID-19 pandemic has hit the UK economy with the force of a once-in-a-generation, perfect storm. As ever in an economic downturn, the construction industry sits at the eye of that storm.
The simultaneous slide in both demand and sentiment, coupled with the UK’s ongoing social distancing restrictions, has blown even the best-run projects off their original course.
Clients navigating uncharted waters now face a new, but innocuous-looking, threat on the horizon – deflation. Much like an iceberg – nine-tenths of which sits below the surface – the true danger of deflation is hidden.
Our latest tender price forecast suggests that the UK is entering what may be a prolonged period of deflation.
Stormy seas, uncertain horizon
Previous recessions have had a negative impact on tender price inflation, typically leading the pace of tender price rises to slow or even reverse.
The CBI’s Fine Margins report in February 2020 highlighted that in 2019 the 10 largest UK contractors by revenue made an average negative profit margin of -0.1 percent.
With profit warnings in the first half of 2020 already greater than those seen across the whole of 2008, a spike in insolvencies would badly degrade both capacity and capability.
Nurturing the supply chain
Given this uncertain horizon, we consider five issues the industry needs to consider to achieve a healthy recovery:
- Collaborate with suppliers
- Move beyond the transactional and adopt an enterprise approach to supply chain engagement
- Align with the innovators and nurture them
- A finger on the pulse when it comes to supply chain capability and fragility
- Power up productivity with off-site construction
Download the report to see more economic data and insight, and to read about tender conditions in the UK.
Please visit our COVID-19 response page for all of our resources relating to the impact of COVID-19 on the construction sector.