06 Apr The impact on housebuilding as non-essential construction work is halted
With concern that coronavirus could be easily spread in the busy environment of a construction site, an increasing number of construction firms are stopping work.
Government guidelines state that construction work can continue if workers are two metres apart. However, some construction companies feel that this is too difficult to enforce.
Currently, the majority of work has been halted on the HS2 rail link, and many housebuilders are following suit with most saying they’ll stop all non-essential work in a bid to prevent the spread of the virus.
Mixed response from housebuilders
One of the largest housebuilders, Taylor Wimpey, announced that it was closing all of its sites. Barratt has said it plans to close 400 sites and offices in order to prioritise the health and safety of its customers and employees.
Persimmon has stated that they intend to cease all but essential work. Meanwhile, Cairn Construction planned to keep its sites open. The company built 2,200 homes last year, and commented: “Aligned to government guidelines, construction activity continues across each of our active sites under extensive health and safety protocols.”
The National Federation of Builders confirmed work could still take place if builders were able to follow safety guidelines on the site. However, the Federation of Master Builders said construction work should only go ahead in the case of emergency projects.
Support for the industry
In the wake of these site closures, Build UK and the Civil Engineering Contractors Association has asked the government to provide additional support to the industry, saying:
“If the government decides to put the country into ‘lockdown’ and restrict the movement of British citizens, decisions will be taken out of the hands of individual companies and sites may have to close. The impact on the industry’s supply chain, consisting of multiple layers of businesses, many of them (small and medium-sized businesses) with a significant amount of self-employed workers, will be catastrophic and unavoidable.”
Short-term impact of housebuilding site closures
The immediate response to news that construction sites were closing was a dramatic drop in shares in housebuilding companies when the markets opened.
This means that housebuilders are going to be under a lot of pressure to increase sales rates when restrictions are lifted. There will be an urgency to maintain cash flow in the face of their committed investments.
In the long-term, this may result in a flurry of buyer incentives as they look for fast sales.
Long-term impact of housebuilding site closures
Some housebuilders may review the intended use of some of their sites and decide to switch to delivering affordable housing with the promise of additional grant funding.
Most forecasters anticipate the disruption to the industry will be short-lived. Demand from institutional build-to-rent investors will still be high, although they may look for additional discounts.
And with the country’s current lack of housing, there will be continued demand for residential development sites. Once things are up and running again, it’s predicted that the housebuilding industry will bounce back rapidly.