Partial year data for 2020 indicates a 6% decline in civil engineering construction output. This follows consistent annual growth in the previous three years. The downturn in 2020 is largely due to the impact of COVID-19, which has caused disruption to projects across the market.

Civil engineering firms were impacted by site closures at the start of the first lockdown in March 2020 and the additional measures and precautions required on reopening. Most contractors operated normally during the second and third national lockdown as construction sites remained open.

While activity in the rail transport sector is set to be strong over the coming years, the impact of COVID-19, which resulted in Network Rail reporting a financial underperformance in 2020, could curtail the operator’s spending going forward. Network Rail has begun preparing a revised business plan, which could lead to the deferral of some projects.

The government’s commitment to infrastructure spending as part of the economic recovery from COVID-19, the “levelling-up” agenda and the need to progress towards Net Zero Carbon by 2050 should ensure sustained growth in the civil engineering sector over the coming years.

Opportunities are set to be particularly strong in the rail transport sector, driven by HS2. Other major projects expected to drive output over the next five years include Hinkley Point C, the Thames Tideway Tunnel, major road schemes as part of the Road Investment Strategy 2 (2020-25) and projects associated with the decarbonisation of the energy system.

• The impact of COVID-19 on the civil engineering construction sector

• The impact of government policy and regulatory changes on the market

• Key drivers for growth across the civil engineering construction market

• The performance of key industry players

• Five-year market outlook

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. The majority of construction firms also shut their sites on 23 March 2020. Sites started to reopen in the subsequent weeks with additional precautions to prevent the spread of infection reflecting Public Health England's guidance.

From 15 June non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions. Construction sites remained open during the second national lockdown under UK government guidelines.

Despite these restrictions, case numbers continued to increase, and after a brief relaxation for Christmas Day a full national lockdown was announced on the evening of 4 January. Construction sites remain open under the government guidelines. There is no defined end date for the lockdown: the legislation presented to Parliament extends to 31 March, but Boris Johnson has said that he hopes schools will be able to re-open after February half term.

The UK’s vaccination programme started on 8 December, and with both the Pfizer-BioNTech and the Oxford-AstraZeneca vaccines licenced for use in the UK, the government aims to offer a vaccine to 15 million people by mid-February.

Our core assumptions on the path of the pandemic had always included an expectation of severe disruption to markets well into 2021, with a strong likelihood that the virus would still be with us even into 2022. Although the second wave of infections and subsequent lockdown puts us towards the negative end of our initial expectations, these developments are still broadly consistent with our previous assumptions.

Similarly, Mintel had factored in the likelihood that an effective vaccine would be available from early- to mid-2021. The licensing of the Pfizer-BioNTech and Oxford-AstraZeneca vaccines puts us slightly ahead of that assumption, but the challenge associated with rolling out a new vaccination programme to millions of people means that our previous assumptions are still broadly consistent with the new reality.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021 and 6.6% in 2022. GDP isn’t expected to return to pre-COVID levels until the fourth quarter of 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.

The current uncertainty, however, means there is wide variation on the range of forecasts, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

The second wave of infections and subsequent lockdown means that the short-term prospects for the country are consistent with the OBR’s negative scenario, but this needs to be balanced against the fact that the vaccine rollout is ahead of even the OBR’s central scenario. We are still therefore basing our medium- to long-term forecasts and market analysis on the OBR’s central economic scenario.

The definitions used in this report for the civil engineering sector are from the Office for National Statistics (ONS), which broadly defines the sector as constituting new infrastructure. A number of areas are defined within this sector, comprising both public and privately financed projects.

The sectors include the following:

Water: The construction of reservoirs, purification plants, dams (except for hydro-electric schemes), aqueducts, wells, conduits, waterworks, pumping stations, water mains, hydraulic works etc.

Sewerage: Sewerage disposal works, the laying of sewers and service drains.

Electricity: Building and civil engineering work for electrical undertakings, such as power stations, dams and other works on hydro-electric schemes, sub stations, laying of cables and the erection of overhead lines.

Gas: Gas works, the laying of gas mains and gas storage facilities.

Communications: Post offices, sorting offices, telephone exchanges, switching centres, cables etc.

Air: Air terminals, runways, hangars, reception halls, radar installations, perimeter fencing etc. for use in connection with airfields.

Railways: Permanent way, tunnels, bridges, cuttings, stations, engine sheds, etc, and electrification of both surface and underground railways

Harbours (including waterways): All works and buildings directly connected with harbours, wharves, docks, piers, jetties (including oil jetties), canals and water ways, dredging, sea walls, embankments and water defences.

Roads: Roads, pavements, bridges, footpaths, lighting, tunnels, flyovers and fencing etc.

Public Work: Work on any public authority, such as government departments, public utilities, nationalised industries, universities, the Post Office, new town corporations and housing associations etc.

Private Work: Work done for a private owner, organisation or developer, including work carried out by firms on their own initiative, and work where the private sector carries the majority of risk/gain. For example, in principle, all PFI contracts are considered private.

All values quoted in this report are at current prices unless otherwise specified.