Despite the buoyant forecast a lack of skilled workers and shortages of materials slowed growth in July 2021ii, and Brexit continues to cause friction in some areas of the supply chain. Shortages of timber, steel, cement, copper and other materials are impacting some projects that are planned or already underway and more than 80%iii of construction businesses reported a rise in the cost of raw materials. Congestion at ports has caused supply chain issues and although the Government has increased the time that HGV drivers can spend on the road, the shortage of qualified driversiv in the haulage industry is also impacting the flow of supplies.
The skills shortage has been an ongoing issue for the construction industry for a number of years but demand reached its highest level in 20 years in 2021, with over 33,000 job vacancies in the sector recorded between April and June 2021v. Construction Products Association economics director Professor Noble Francis said, "Between April and June 2021, the vacancies were 25 per cent higher than the average for 2019 and it illustrates clearly that in some regions and some construction sectors there are shortages of key skills due to high demand but a lack of skilled labour, which has been exacerbated by the loss of a significant proportion of EU workers."
Whilst the outlook overall looks positive, these factors may have significant impact for some construction projects leading to delays. With the sector so reliant on the supply chain we are likely to see a climate of uncertainty continue and the on-going risks of non-payment is still a significant issue. Businesses who are financially in good health themselves may be impacted by one or more of their customers failing to pay them and the knock on or ‘domino’ effect that this can have.
Construction companies should consider trade credit insurance to help protect themselves against the risk of non-payment. Gallagher has a specialist Trade Credit team who can negotiate and implement a tailored credit insurance policy and who, in the event of a claim, support companies through the entire process to help their businesses get back on track.
Infrastructure, private housing, repair and maintenance are all areas of construction where growth is likely to be particularly strong with activity 10% higher than in 2019vi but with the predicted shift to more flexible working across UK businesses, the commercial property sector is likely to see a decline in future construction projects as office footprint is reduced.
The UK also lost 175,000 chain store outletsvii in 2020 and an average of 48 shops, restaurants and leisure venues a day disappeared from Britain’s high streets last year. With more people shopping online and working from home we are likely to see an evolution of our city centres over the coming decade. This could result in further growth in the construction sector as landlords look to repurpose buildings to secure future income but at the moment it is difficult to predict how many will be in a position to make this investment after the challenges of the past eighteen months.
The predicted growth in construction is encouraging for the sector but the disruptions in the supply chain, skills shortage and the changing social and economic landscape of the UK will continue to bring challenges in 2021 and beyond.
Sources:
i. Double-digit growth predicted for construction in 2021 - Construction Manager (constructionmanagermagazine.com)
ii. Staff and materials shortages slow growth in UK construction sector | Construction industry | The Guardian
iii. Staff and materials shortages slow growth in UK construction sector | Construction industry | The Guardian
iv. https://www.bbc.co.uk/news/57810729
v. https://www.constructionnews.co.uk/supply-chain/demand-for-construction-workers-nears-20-year-high-16-07-2021/
vi. https://www.constructionnews.co.uk/supply-chain/demand-for-construction-workers-nears-20-year-high-16-07-2021/
vii. https://www.theguardian.com/business/2021/mar/14/great-britain-high-streets-lost-more-than-17500-chain-stores-in-2020-covid
The opinions and views expressed in the above article are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.
