17 June 2020

Stace Outlook Index, June 2020

The Stace Outlook Index brings you the latest updates on the UK economy, the industry and Tender Price Index (TPI) forecasts.

An industry impacted by COVID-19

Covid-19 continues to raise many challenges to the operation of the country with a profound effect on the property and construction industry in addition to the UK and global economy.

Construction output fell by 40.1% in April (ONS) and with continued uncertainty and ongoing restrictions, total UK Construction Output is predicted to fall by 25% in 2020 (Construction Products Association). However, Build UK’s contractor members are now reporting that 97% of their sites are operating (The Construction Index).

Uncertainty in the market is reflected in tender price forecasts. Some industry commentators forecast a wide range between -3% to 1% for 2020 with most predicting that prices will flatline. Increased competition, reduction in salaries, and a tight squeeze on profit margins could be offset by potentially lower productivity as a result of social distancing measures, extended time on site, and constraints on the availability of labour and materials.

In the absence of comprehensive data, we are using BCIS TPI percentages as an interim measure, albeit assessing each project individually. BCIS TPI projections fluctuate regularly and, in our opinion, their current assessment is on the high side.

These are extraordinary and unsettling times, however, the Government’s various rescue initiatives for businesses provides comfort and the Bank of England predicts UK GDP could rebound relatively quickly in 2020 H2 as restrictions on movement and trade are lifted (Monetary Policy Report May 2020).