Coronavirus Market Update – 7th May 2020

This week, the great news is that not only have we seen a steadying in the number of sites being suspended but, as we hoped, we’ve also seen the reactivation of a growing number of sites as contractors and developers, in particular Vistry, Persimmon and Taylor Wimpey, have adapted site operations to include social distancing.

As of yesterday, there were 3,026 suspended large-scale sites, which accounts for 36% of those sites currently under construction. This is down from 40% last week, because work has now resumed on 551 sites that were initially suspended at the outset of the lockdown. The number of re-activated sites is set to rise steadily over the coming weeks, with a number of firms announcing that they are planning a phased re-opening of their sites.

Particularly encouraging is the continued re-opening of sites by major housebuilders. Taylor Wimpey for example has announced an ongoing and phased programme of site re-openings. They have provided face masks for those working on site and their sites in the South West, where the number of COVID cases has been relatively low, have been the first to re-open.

At the request of the devolved authorities, more extensive shut downs remain in place in Scotland and Northern Ireland where 78% of sites are currently suspended, compared to 30% in England and Wales.

Contract Awards

The immediate development pipeline has weakened since the lockdown came into force. At 395 the number of main contacts awarded last month was 60% lower than a year ago. The overall value of main contracts awarded was 43% lower than a year ago, despite a 24% year-on-year rise in the value of major contracts of £100 million or more.

But whilst these figures are dramatic, there are related indicators that suggest these declines will be short-lived.

An average of 62 new bidders were added against projects each day this week, and while this is 18% down on figures seen prior to the lockdown coming into force, this is a far smaller drop than the declines we have seen in contract awards and project starts.

This suggests that the average tendering process has been extended during the lockdown. This may be due to delays to decision-making processes as key staff work from home, with the delayed decisions exacerbating the short-term drop in contract awards.

Therefore, there may be a progressive recovery in invitations to tender and contract awards as lockdown restrictions are gradually eased from Monday onwards.

Planning Approvals

In addition, the early development pipeline still remains relatively firm. The number of planning applications being published by planning authorities has averaged 1,368 a day over the last week. This is an improvement on the previous week and is just 11% down on the daily average seen earlier this year, prior to the COVID-19 lockdown. At 1,409 the daily average number of published planning decisions is also 11% lower than the average seen prior to the lockdown.

The decline in applications and decisions on large construction projects (worth £250,000 or more) has been greater, applications dropping by 14% and decisions by 26%. The sharper declines in larger projects may reflect delays in compiling and submitting the supporting documentation for these projects.

Therefore, an easing in the lockdown may prompt an upturn in applications over the next few weeks.