Despite the increasing digitalisation of the economy, the construction sector remains as a central part of economy, providing homes, infrastructure and much employment. In this post John Allcoat surveys the recent drivers of output, new orders and productivity and the challenges currently facing the sector.
As it was for most sectors, 2020 was a highly unusual year for the construction industry. A lot of work was paused on building sites during the early weeks of the first lockdown in April and May last year, although activity increased quite rapidly in the second half of the year when the economy reopened, as the industry adapted to new ways of working. The trend for house renovations and extensions, given people were spending more time in their homes than usual, helped boost activity along with businesses undertaking refurbishments in premises to implement social distancing measures effectively.
Infrastructure continued to perform strongly in 2020 and 2021, with projects such as High Speed 2, motorway improvements and windfarm developments leading the way. However, it was noticeable that private investment was the driver to infrastructure growth in contrast to strong growth in public infrastructure in previous years.
Construction new orders, a useful indicator of future growth, saw large falls in 2020 with entertainment and public spending on schools, colleges and universities seeing pronounced falls; whereas health related orders were up, partly as a result of the Nightingale hospitals, constructed to combat covid-19. New orders have subsequently recovered to their pre-pandemic level in Quarter 2 2021, with private industrial activity and the need for extra warehouse space a key driver here.
Total employment in construction fell about 3% in 2020 compared with 2019, especially among self-employed workers, which saw a 11% fall. However, the number of employees actually rose slightly, and the number of registered construction companies increased, providing some signs of optimism about the future.
Alongside today’s annual construction statistics release we’ve published new analysis of trends in productivity in the construction industry. This is part of a new series of ‘productivity industry spotlight’ articles, to examine more closely the trends in different industries.
Productivity growth in the construction industry has been subdued over the past 20 years or so, although has picked up in recent years. Evidence of an increasingly educated workforce and increasing investment in technology and intangible assets, might be supporting this recent increase in productivity. However, the workforce is also ageing, and average pay remains below the economy average.
With recent supply chain issues and increasing demand with the reopening of the economy, the price of many raw materials used in the industry have risen while some have also become harder to come by. Tomorrow we will publish an article examining the recent movements in construction materials and plant hire prices in further detail.
The construction industry remains key to the wider economy, but despite recent challenges has recovered well from the large falls experienced at the start of the pandemic.