Hockey stick-shaped comeback the most likely for construction, consultant adds

Rider Levett Bucknall has warned the industry is facing a host of problems as it tries to plot a path to recovery from the covid-19 crisis.

The firm’s latest tender price forecast said top of firms’ in-trays were productivity rates, access to materials, worries over an overseas workforce deciding not to head back to the UK and concerns about upcoming pipelines of work.

coronavirus construction

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Worries about productivity levels at reopened sites are among several issues firms are having to deal with as lockdown restrictions get eased

It said overhead and profit levels are tightening, while main contractors were looking to increase competition amongst the supply chain, through bigger tender lists, which would impact on the bottom line of suppliers.

And it added the industry’s “overwhelming concern has been for pipeline status. Fragility underlies confidence within the market.”

Last week Osborne said it was cutting 75 jobs and its chief executive Andy Steele pointed the finger at worries about upcoming pipelines of work as one of the reasons for the cull.

RLB also flagged issues over clients’ attitude to risk. “Allocation and arrangement of covid-19 related risk are likely to be a significant factor on tender pricing,” it said.

“Those clients willing to take some of the risk are more likely to see more competitive views on expected margins.”

It added: “Falling margins as a result of demand-side competition and an increased uncertainty of input costs is likely to see a riskier trading environment for contractor and increased insolvencies as a result.

“Contracted prices will be more telling of market sentiment than tender prices, with an increased use of contractor-qualifications, provisional sums and time-spend negotiating mutually acceptable terms.”

It said that a hockey stick-shaped recovery was expected across most construction-related sectors, although it said infrastructure and affordable housing might be more in line for a V-shaped recovery. It added that hospitality and leisure were more likely to recover with a U or bathtub shape due to prolonged return to revenue generation for those firms working in those sectors.