MHA Construction Sector Report 2020 now available!

The latest Construction Report reveals a stark divide in how construction companies are coping with the COVID-19 pandemic.

To compile the report, our national MHA Construction team benchmarked construction businesses across the UK to paint a national picture of the sector entering lockdown in March. It also revealed the results of the survey taken this summer to gauge the response of businesses currently responding to COVID-19. Finally, the report highlights regional projects or significant issues that may shape local responses.

By providing this snapshot into the sector’s conditions, we aim to showcase ways in which the Government can provide the financial and other support the sector needs to not just survive but thrive in 2020 and beyond. 

Read the full Report

State of the Sector entering COVID-19

As a whole, turnover in the construction industry increased year on year. However, profitability levels on average were dented across the sector with a slight reduction in both gross profit and net profit levels.

Prior to lockdown, the sector was generally borrowing less than the year before. Continued profitability, albeit at lower levels than experienced previously, and stronger balance sheet positions indicate good collection and management of cash reserves.

Overall the construction sector employed 3.6% more staff than the year before. Some of the increase in staff numbers would have been necessary to service the overall increased levels of activity experienced by the sector.

COVID-19

The impact of COVID-19 upon the sector was particularly untimely. Only months before, the Government had announced notice of significant infrastructure investments. The sector was primed for a sweet spot of both private and public led contracts to assuage concerns over the potential
impact of Brexit.

Respondents to our survey highlighted the split between businesses which have fared well through COVID-19, and those which have suffered, with 44% citing this as ‘minimal’ compared to 49% who see a ‘substantial’
impact.

Funding

Government support in the form of the Coronavirus Business Interruption Loan Scheme (CBILS) and the Job Retention Scheme has helped the sector enormously.

More than a quarter of respondents have used bank loans over the past 12 months. However, banks are being very selective and focusing on what they see as more resilient sectors.

Employment

The consensus is that the Government Coronavirus Job Retention Scheme (CJRS) reduced many potential redundancies. Our survey confirmed that around 80% of respondents used the scheme, and less than a third made redundancies. 71% of businesses expect to bring all staff back following furlough.

Despite unemployment levels in the UK, the construction industry still recruits EU nationals due to the investments required for retraining people in this country.

Technology

A wide range of technology and innovation was already well embedded and
being extensively used throughout parts of the industry. Nearly a quarter of respondents reported the use of drone technology and a significant number were already using collaborative technologies such as online staff
communication hubs and camera facilitation of off-site working. Nearly a fifth were already using a range of construction methods off-site.

The survey confirms our expectations that COVID-19 has accelerated the use of many of these technologies. However only a third of respondents have successfully claimed R&D tax relief.

Looking forward

Less than a third of our respondents indicated that there would be any significant capital investment in their businesses within the next 12 months, with a further 20% unsure.

Nearly one third of our respondents felt business activity was back at pre-COVID-19 levels, which is encouraging. However more than 50% felt it would take at least six months to bounce back to that level.

Regional outlook – South East

Construction businesses in the South East have generally adapted well since lockdown was lifted. They are managing sites to ensure activity can continue, whilst adhering to social distancing measures by spreading workforces around sites.

Inevitably there are delays and completion dates are being put back, which in turn is expected to have some impact on funding by increasing the cost of capital.

State of the Sector Webinar

  • Date: Tuesday 6 October
  • Time: 10.00-11.00am

Our upcoming State of the Sector Webinar will discuss the findings of our MHA Construction Sector Report. You can sign up to watch it live with the opportunity to put your questions forward. Our national MHA Construction team will discuss how the sector is responding to current challenges, what support the government needs to provide and the way forward for the industry.

We’ll also have a brief economic update from Mark Berrisford-Smith, Chief Economist at HSBC, as well as an update from Construction News Editor David Price.

Register for the webinar

If you would like to discuss any of the issues raised in the Report further, please get in touch with a member of our Construction and Real Estate team on 01903 234094.