Covid cuts construction activity by 20pc

Surveyors reveal impact of virus on construction sector, with Brexit likely to add to sector’s woes.

Covid-19 has resulted in a 20pc decrease in activity levels in the Irish construction sector while more than half of surveyors involved in the sector expect to see a decrease in workloads over the next 12 months.

More than two-thirds of surveyors expect a decrease in profit while seven out of ten hold a negative or neutral outlook for activity in the construction sector for the next 12 months.

“If they are not seeing positive activity levels now, this will translate to a challenging year in respect of residential and non-residential building activity”

These are among the key findings of the 4th edition of the Society of Chartered Surveyors Ireland/PwC Construction Market Monitor.

Almost 300 surveyors were canvassed in February for their views, but due to the unprecedented impact of Covid-19, respondents were surveyed again in June. As such the findings capture both the pre and post Covid views of participants and the sea change in sentiment towards the sector which occurred over that four-month period.

Lockdown took its toll

When surveyed in February, 67pc of the surveyors who took part expected to see an increase in workloads over the coming 12 months and only 8pc expected to see a decrease. Fast forward to June and 51pc expect to see a decrease while only 22pc anticipate an increase.

In February only 12pc of respondents believed that profits would decline. But by June and after three months of lockdown and site closures that figure has jumped to 69pc.

Micheál Mahon, the President of the SCSI said that while the sector had done well to weather the initial impact of Covid-19, the findings raise serious concerns for the future.

“The building, project management, quantity and planning surveyors who took part in this survey are very well placed to capture the expected pipeline activity over the next 6-12 months,” said Mahon. “If they are not seeing positive activity levels now, this will translate to a challenging year in respect of residential and non-residential building activity.”

He continued: “The vast majority of surveyors who participated in the survey believe the pandemic will exacerbate the difficulties in raising development finance. They identified the viability of projects, access to bank credit, and cash flow / liquidity constraints as the top three issues contributing to difficulties in this area. Furthermore, they identified financial constraints on consumers and clients as potentially having the biggest impact on building activity in the coming months.

“Additionally, while measures relating to Covid-19, such as increased sanitation facilities, PPE gear and training, will add to the bottom line, of greater concern are the costs of project delays, which will need to be monitored.”

Opportunities exist to further leverage digital

Sinead Lew, senior manager, PwC Construction & Real Estate Practice, said that in February, 80pc of surveyors reported an under supply of skills across most construction trades and professions.  “Covid-19 is likely to have exacerbated the issue with large numbers of overseas workers who were based here returning home.  

“The survey also reports that 61pc of surveyors saw the crisis as leading to increased investment in digitalisation / automation within their firms. This is a very positive development.  However, in order for there to be long-lasting change, increased use of technology needs to occur right across the construction supply chain as well upskilling the workforce for a digital world.

“Appropriate training and financial incentives need to be made available so that smaller companies, in particular, can be supported and encouraged to innovate and digitalise. While we welcome the education and training measures announced in the July Stimulus, in Budget 2021 we would also welcome a tax relief for employers based on the cost of upskilling employees as a result of operational changes brought about by Covid-19.”

Very few are prepared for Brexit

Just 9pc of respondents said that they are ‘well prepared’ for Brexit. Despite ongoing negotiations, it looks increasingly likely that the UK will leave the EU without a deal on the 31st of December 2020 resulting in great disruption to trade, supply chains and increasing costs and job losses for the businesses impacted.

Sinead Lew said: “In the construction sector we have thus far seen a widespread ‘wait and see’ approach to Brexit.  Construction firms have no more time to wait and need to take action now to prepare to operate in a post-Brexit era. 

“Some of these actions include preparing for customs authorisations, investing in customs expertise, reviewing potential cash flow constraints, developing contingency plans to mitigate border delays and reducing customs duties as well as checking the workforce and any immigration permits needed.”

By John Kennedy (john.kennedy3@boi.com)

Published: 6 October, 2020