With the initial easing by the Government of the lockdown restrictions coming into the effect this week, our researchers have identified a growing number of suspended projects where work has now restarted on site or which are currently being prepared for a restart over the next few weeks.
Over the last week we have seen an increasing number of suspended sites restarted by contractors and developers. Overall there were 2,838 suspended sites yesterday, a 6% fall on a week ago. Suspended sites currently account for a third of all sites currently under construction and the same by value. This compares with around 38% just two weeks ago.
The improvement in active sites has been in England and Wales, where 27% and 24% of sites respectively are currently suspended. This compares to around 78% of sites in Scotland and Northern Ireland where there has been no increase in site activity as the more extensive shut downs implemented by the devolved authorities remain in place.
The declines in England and Wales are due to the reactivation of a growing number of sites as contractors and developers have adapted their site operations to include social distancing. Work has resumed on 17% of sites that were initially suspended at the outset of the lockdown. Larger sites in particular have been reactivated; as a result, in value terms a quarter of construction work that was initially suspended has now been reactivated.
This may seem like a low proportion of suspended sites given the numerous headlines over the last two weeks of housebuilders and contractors announcing that they are returning to work.
This is because construction has yet to resume on many of the sites covered in the recent announcements, rather the sites are currently being prepared for the safe resumption of work. This can involve the widening of walkways and the introduction of one-way systems on site, alongside the introduction of staggered working hours, PPE provision and additional site supervision.
Accordingly, we expect a further acceleration in site reactivations over the coming weeks once these measures are put in place.
To date the civil engineering, office, health and education sectors have seen the most widespread reactivation of suspended sites. For example, work has restarted on 28% of suspended education projects and 32% of health projects. In contrast hotel & leisure, retail and especially residential projects have been slow to restart.
However, over the last two weeks we have seen a growing number of residential projects reactivated. Currently 16% of suspended private housing projects have been reactivated – up from just 3% at the end of last month.
The phased programme of site re-openings announced by the major housebuilders will boost this total further over the coming weeks.
Last month the pattern of suspended work was matched by a comparable decline in new projects starting on site. The Glenigan Index tracks new construction activity by looking at the underlying value of project starts - excluding the high value projects of £100 million or more. The latest Glenigan Index recorded a 37% fall in the value of project starts during the three months to the end of April against the same period a year ago. The fall was due to a weakening in project starts during the closing weeks of March and a sharp fall over the last month. The value of starts in April was at half the level of a year ago!
Whilst we expect project starts to remain sparse this month, the progressive reactivation of existing sites points to a partial recovery in starts as contractors apply the social distancing practices to delayed projects.
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 value of underlying contract awards, excluding major projects of £100 million or more, was almost half the level a year ago - a similar decline to the drop in the value of April project starts.
Whilst dramatic, there are related indicators that suggest these declines will be short-lived.
An average of 59 new bidders a day were added against projects this week, at 35% this is a smaller drop against the average number added prior to the lockdown than the declines we have seen in contract awards and project starts.
This suggests a number of factors are at work.
Whilst the fall in the number to bidders and contract awards in part reflects greater caution among clients to commit to projects in the present economic environment, the smaller decline in bidder numbers suggests that the average tendering process has been extended during the lockdown. This may also in part 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.
Accordingly, there may be a progressive recovery in invitations to tender and contract awards as gradual easing in lockdown restrictions unfolds.
Furthermore, the early development pipeline remains relatively firm. The number of planning applications being published by planning authorities has averaged 1,523 a day over the last week.
This is as 8% rise on the previous week and is just 3% down on the daily average seen earlier this year, prior to the COVID-19 lockdown. At 1,364 the daily average number of published planning decisions is 11% lower than the average seen prior to the lockdown.
The decline in applications and decisions on large construction projects (of £250,000 or more) has been greater, applications dropping by 19% and decisions by 30%. The sharper declines in larger projects may reflect delays in compiling and submitting the supporting documentation for these larger projects. Accordingly, an easing in the lockdown may prompt an upturn in applications over the next few weeks.
All of which suggests that the industry potentially faces of a growing pipeline of planned and suspended projects as the lockdown is eased over the weeks ahead. A pipeline of work that will have to be delivered whilst adopting new social distancing working.