Construction is a major element of the UK economy, typically accounting for 6% of total economic output. Parts of the sector have suffered in recent years from an element of economic uncertainty that surrounded the Brexit decision. That was due to finally be ended with some clarity on any potential trade deal with the EU by December 2020. However, international economies have been devastated in Q2 2020 by the impact of COVID-19. As at mid-April 2020, there is no certainty that those social distancing measures in the UK will be concluded in Q2. This is leading to huge variations in expectations of the wider economy and has led to equally huge uncertainty across different construction sectors.

The general consensus is that the magnitude of the decline in Q2 will be unprecedented, but that some of the lost ground will be recovered after the restrictions are lifted. Traditionally, construction activity exaggerates GDP developments, so this will have a very significant impact on the market.

COVID-19 has derailed what might otherwise have been expected to be a strong year for parts of the sector. The March 2020 budget clearly witnessed a major change in Government policy, moving from restricting public spending generally to stimulating the economy through some infrastructure and specific sector construction investments, with the government appearing to fear a negative impact from Brexit.

Prior to that budget, the construction sector had become increasingly sector-specific in terms of growth and decline. The 2020 budget furthered that trend, while COVID-19 has exacerbated it even more. For many construction sectors, the impact of COVID-19 will be short term, and there could even be growth in activity to counter some of the lost activity in Q2 2020.

Other sectors will see a far more pronounced and long-term reduction in activity. Such sectors include office construction where a major trend to home-working is set to lead to widespread office downsizing, and retail, where the ecommerce trend that was already strongly established will be boosted even more by the social distancing measures. Some sectors will see more medium-term impacts such as the entertainment sector where consumer confidence in health safety needs to be restored before the sector returns to a vibrant market.

However, some sectors will grow as a consequence of COVID-19, such as warehousing, which was already benefitting from both the ecommerce trend and the potential need for stockpiling surrounding Brexit.

• How, and why, sectors like office and retail construction will have long-term changes imposed by COVID-19 beyond the short term negative effects of social distancing.

• Whether the changes in use of buildings following COVID-19 will offer opportunities to address the housing shortage.

• What sectors will have a long term growth in demand as a result of the long-term changes in society following COVID-19.

• How the refurbishment & maintenance markets will react to COVID-19, and then to Brexit.

The definitions used in this Report for the construction sector are from the ONS. The civil engineering sector has been excluded, but is available separately from Mintel’s Civil Engineering –UK, January 2020 Report. A number of sectors are defined within the construction sector, comprising both publicly- and privately-financed projects.

Public work is for any public authority such as government departments, public utilities, nationalised industries, universities, the Post Office, new town corporations, housing associations, etc.

Private work is for a private owner, organisation or developer, and includes work carried out by firms on their own initiative. It includes work where the private sector carries the majority of the risk/gain, ie in principle, all PFI contracts are private.

The sectors include the following:

Public sector housing: comprising housing schemes, homes for the elderly and the provision within housing sites of roads and services for utilities such as gas, water, electricity, sewage and drainage, which are financed either through local authorities or housing associations.

Private sector housing: comprising all privately-owned buildings for residential use such as houses, flats, maisonettes, bungalows, cottages and the provision of services to new developments.

Public sector non-residential: which is defined as comprising a number of activities:

• Coal mining: all new coal mine construction, such as sinking shafts, tunnelling, etc.

• Schools: state schools or colleges, including technical colleges and institutes of agriculture.

• Universities: including halls of residence and research establishments.

• Health: comprising hospitals, medical schools, clinics, welfare centres and adult training facilities.

• Offices: comprising local and central government offices, including town halls and offices for all public bodies except the armed forces and police headquarters.

• Factories: comprising all publicly-owned factories, shipyards, warehouses and skill centres.

• Garages: comprising buildings for storage, the repair and maintenance of road vehicles, transport workshops, bus depots, road goods transport depots and car parks.

• Shops: comprising municipal shopping developments for which the contract has been let by the local authority.

• Oil: comprising oil installations.

• Agriculture, entertainment and communications: comprising buildings and work on publicly-financed horticultural establishments, fen and agricultural drainage, and veterinary clinics. Theatres, restaurants, public swimming baths, caravan sites at holiday resorts, works and buildings at sports grounds, stadiums, racecourses, etc. Post Offices, BBC and IBA installations.

• Miscellaneous: comprising all work not clearly covered by other previously identified headings, such as fire stations, police stations, prisons, reformatories, remand homes, civil defence work, UK Atomic Energy Authority work, council depots, museums and libraries.

Private industrial: comprising factories, warehouses, wholesale depots, and all other work and building for the purpose of industrial production or processing, oil refineries, concrete fixed leg oil production platforms (but excluding rigs) and private steelworks.

Private commercial: comprising a number of separate sectors:

• Offices: including all office buildings and banks.

• Shops: comprising all buildings for retail distribution, such as shops, department stores, retail markets and showrooms.

• Entertainment: comprising theatres, concert halls, cinemas, hotels, public houses, restaurants, cafés, holiday camps, swimming pools, works and buildings at sports grounds, stadiums and other places of sport or recreation and youth hostels.

• Garages: comprising repair garages, petrol filling stations, bus depots, goods transport depots and any other works or buildings for the storage, repair and maintenance of road vehicles and car parks.

• Schools and colleges: comprising schools and colleges in the private sector, financed wholly from private funds.

• Agriculture: comprising all buildings and work on farms and horticultural establishments.

• Health: comprising all private hospitals, nursing homes and clinics.

• Miscellaneous: comprising all work not clearly covered by other headings, such as exhibitions, caravan sites, churches and church halls.

Repair and maintenance is defined to include the following:

• Housing: including any conversion of, or extension to, any existing dwelling, and all other work such as improvement, renovation, refurbishment, planned maintenance and any other type of expenditure on repairs or maintenance.

• All other sectors: comprising repair and maintenance work of any type, including planned and contractual maintenance.

All values quoted in this Report are at current prices unless otherwise specified. Some numbers in tables do not total exactly due to rounding.