Commentators and forecasters across the world are grasping at whatever straws they think they can see for signs of a rebound from the Covid-19 lockdown’s impact on economies. The adverse impact is in the order of 3% of GDP each month, so it is no surprise that governments are keen to ease lockdowns as soon as seems justifiable, and health services are on standby to deal with a probably inevitable, but acceptable, increase in the numbers infected.
The next chapters in the story of this coronavirus can’t be predicted with any certainty, but the often dismal science of economics can at least draw on some history about how economies behave to inform forecasts. The bravest commentators are predicting a fairly rapid economic growth, although we are far away from unanimity on whether the recovery will be quite as ‘V’ shaped as we would like.
The Westminster and devolved governments are promising no return to austerity and a renewed focus on infrastructure investment as part of plans to get the economy growing again. Despite the undeniable need for this investment, on projects that are justified in their own terms, and which in most cases the country has long needed, many will doubt whether most of it will be delivered. But even assuming that a government for once intends to keep its investment promises the construction sector might not be in any shape to fully deliver it, as long standing industry problems are being brought into ever sharper focus by the Covid-19 impact.
Research from Turner & Townsend (see News) highlights uncertainty regarding whether labour will even turn up on site. This along with social distancing measures and delays in materials deliveries will compound underlying performance problems and worsen the industry’s productivity performance.
The research suggests that construction sites are facing productivity losses of around 35% due to the impacts of Covid-19. Programme delays and spiralling costs will follow as inevitably as will an increase in the number of disputes.
T&T’s modelling suggests that before the pandemic a £20m commercial real estate project with an 81 week programme would typically suffer productivity losses of 20%, which will rise to 35% because of Covid-19. This will translate to completion delays of up to 35 weeks, increasing preliminary costs alone by some £600,000. Labour shortages plus the impact of social distancing accounts for some 7% of productivity losses and another 1% arises from the poor transfer of design information while remote working.
Clearly, there will be multiple opportunities for disputes to arise and there will be serious amounts of money to be fought over. Traditional responses to projects falling behind schedule are to increase the numbers of workers on site – which itself often leads to disputes about payment; but will be hard to do now because of social distancing.
To mitigate the impact of Covid-19 and boost performance, T&T says the construction industry should embrace digital platforms and offsite construction methods and adopt ‘lean’ approaches used in manufacturing. Perhaps productivity can be improved through smarter working practices, by embracing modern methods of construction for example. Unfortunately, T&T also points out that a complete mindset shift in the industry is needed to close the productivity gap. That might be a straw worth clutching at.
Nick Barrett
Editor