Impact of Covid-19 and Brexit on the construction sector
As electrical contractors working across the UK, we’ve experienced at first hand the impact of Covid-19 and Brexit on the construction sector.
Recent reports indicate that the construction industry is now booming, which is fantastic news following a great deal of uncertainty and stress over the past five years, particularly the most recent 18 months. Indeed, according to data from the trade body Construction Products Association, construction output in the UK during May actually beat pre-pandemic levels.
The key drivers of this surge in construction activity have been a huge rise in home refurbishments, housing developments and new infrastructure projects during 2021.
While this is great news for the industry, it has also brought with it some challenges and exacerbated some issues. Of particular concern at the moment are labour shortages, disruption to the supply chain, and a lack of raw materials and an increase in their cost.
A shortage of workers has been caused by both the pandemic and Brexit. Covid contact tracing and isolation rules have forced employees to take time off work more than usual. And there are now around half the number of EU-born construction workers in the UK compared to in 2017 after many have returned home and many more have been unable to enter the UK due to a change in immigration restrictions.
Added to this has been a drop in the number of European haulage drivers in the UK because of Brexit, which has led to delayed deliveries within the supply chain.
Supply chain disruption
Supply chain disruption and a rise in shipping costs have been caused not just by the pandemic but also by a variety of other factors, including the blocking of the Suez Canal by a ship earlier this year and capacity issues at Chinese ports. This has led to both an increase in the cost of raw materials and a shortage of materials such as cement, timber, copper and steel.
Lack of materials and rising costs
The increase in construction activity has led to an unprecedented rise in demand for materials. Combined with the disruption to the supply chain, this has caused the cost of materials to rise, and the availability of those materials to fall. Lead times and prices have been increasing as imports of raw materials into the UK are affected by global demand, with the need for steel worldwide exceeding supply.
In addition, timber production in Scandinavia has been affected by this year’s warmer winter, while Brexit has also had an impact on timber supply in the UK because 80 per cent of softwood is imported into the country from Europe.
Effect on businesses
For businesses like ourselves at DRF Electrical who work in the construction industry, all of this means we continue to operate in an unsettled environment that is becoming ever more strained. There have already been reports of construction output beginning to decline as the challenges around supply and labour begin to have an impact. Projects are inevitably being delayed and it is now increasingly more difficult to plan project deadlines with any certainty.
All of this is inevitably affecting payments for projects, which can have a particularly detrimental effect on SMEs and smaller contractors. And, with forecasts suggesting the increase in construction output will continue to surge through to 2022, both in the UK and also across the world, the challenges we are currently facing look set to continue for the time being.
In spite of what seems to be a boom time for the industry, there remains a lot of uncertainty. It’s to be hoped that reports do not become more common of firms struggling to keep going because of cash flow challenges, project delays, and shortages of materials and skilled labour.