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Guest Blog – Covid-19 in Construction: The Story So Far

Updated: Oct 30, 2023

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What's new this week?

In this week’s guest blog, Alexandra Dorling MRICS, Senior MEP Cost Consultant at CBRE and Consultant at Property Elite, takes a look at the story so far relating to Covid-19 and construction.

She shares her valuable views in relation to the impact on the construction industry and what might be in store for the coming months…

So, what is the story so far?

In January 2020, there was one word at the forefront of people’s minds: Brexit.

Clients and supply chains were trying to put measures in place to minimise any detrimental effect of the UK’s withdrawal from the European Union and Free Market would have on their businesses, construction projects and supply chains. Consultants were working with the supply chains to develop strong collaborative plans to minimise any negative effect of new border controls and teething problems relating to this. No-one, at this point, could have anticipated a global pandemic…

Towards the end of January and beginning of February 2020, we were starting to hear about a new disease emerging in China, which was leading to a number of key manufacturers closing in order to contain the virus.

Initial thoughts were that this could potentially blow over and cause a small blip in the supply chain. This would particularly be in relation to particular materials and components for the manufacture of plant and equipment.

The end of February saw the increase of cases present in the Lombardy region of Italy and on 22nd February the first death was recorded. The virus began spreading through this region as the world looked on in shock and awe.

Clients were asking us what this could mean for them and if they should they be worried. Initial thoughts were that it wouldn’t happen to us, we had nothing to worry about and we should carry on as normal. Materials and equipment generally supplied by Italy were procured and ordered early, in time for the summer when everything would blow over…

We began looking at the “Brexit Stocks” that had been stockpiled in anticipation of potential border frictions, which would have slowed supply to sites countrywide. However, it was known early on that eventually these would be depleted. Even though companies had stockpiled certain materials from Italy and other European nations, it was still anticipated that there would be some level of productivity and procurement from these areas in a Brexit scenario. The full lockdown and closure of key manufacturing sites had never been anticipated.

Fast forward one month, and we saw the first country wide lock down imposed by a UK government, banning all “non-essential” travel, and forcing the closure of businesses, venues facilities amenities and places of worship. Due to the ambiguity of the term “non-essential”, there was wide scale confusion amongst the construction industry; who was and wasn’t considered a key worker, should sites continue on and should contractors down tools and stay at home until the country was released from lockdown.

Both Clients and Contractors were unclear as to what their legal obligations were. Did Covid-19 constitute a Force Majeure? Were Contractors entitled to an extension of time? Should Clients be instructing Contractors to stop all works and keep their staff in doors, or should they be taking advice from the Contractor as to whether or not it was safe to continue works?

There was anecdotal evidence of Contractors continuing onsite, awaiting instruction from the Client to walk away, in the hope that they were not hit with Liquidated Damages when Practical Completion was not met. On the flipside, there are the stories of Clients and Contractors working together to make sites structurally sound and watertight and sharing any commercial impact of the months ahead.

The lockdown has shown the best and worst of companies, not only within construction, but also in the wider market. People have rallied together to keep the country going, and the British Blitz Spirit has been felt in every corner of the country, where others have sought to seek advantage from the situation.

The construction industry worked with the Armed Forces and NHS to deliver field hospitals around the country such as the Nightingale in the London Excel, and Birmingham NEC, and continues to work alongside the government to deliver key infrastructure projects such as HS2.

We are seeing the industry adapt immediately to “the new normal” and putting measures in place to protect their staff, supply chains and the public from any unnecessary harm through either social distancing measures, increased levels of PPE and work from home initiatives, where possible.

From an economic perspective, there is a large level of uncertainty as to what we can expect next. As the Construction industry comprises circa 30% of UK GDP, we are generally the first indication of what is next, so people will be watching us closely. There is a growing feeling this could be the deepest recession seen in a century - how long this lasts though is currently up for debate. The Government and the Bank of England are working together to support the nation in it’s time of need through initiatives such as the furlough scheme, mortgage freezes and reduction of the base interest rate.

However, as my wise father always used to say - “nothing in life comes for free”. The funding made available by the Government to date will need to be paid back in some way shape or form, and it is this repayment method that could be the deciding factor. As with all matters concerning uncertain economic climates, the stocks markets and banking sectors become nervous and hold back on lending. We have already seen loan to value ratios for mortgages decreasing, which will no doubt have an effect on the housing market, of which the UK economy is so reliant.

So the question is, not if, but when the recession hits, did the industry learn from the mistakes made in the financial crises of 2008 and the early 90s?

How can we help?

Stay tuned for our next blog post to help build a better you

N.b. Nothing in this article constitutes legal, professional or financial advice.


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