How is COVID-19 impacting the construction industry?


Jamie Johnson, CEO of FJP Investment, looks at the impact of coronavirus on the construction industry, the sector’s immediate response and the longer-term view

The entire economy has been hit hard by the unexpected outbreak of the novel coronavirus, or COVID-19. Reports seem to suggest that the stock markets are falling faster than during the Wall Street Crash, and supply chains worldwide have been majorly disrupted.

For the construction industry, which was on the cusp of feeling the benefits from a major slate of government spending, this has been extremely frustrating. Early 2020 had seen cautious optimism that the new investments — such as the new National Infrastructure Strategy, purportedly worth £100bn over the course of the next parliament — would trigger a housebuilding revolution. However, until the situation improves, public and private sector confidence to begin major new projects will remain scarce.

Of course, the spread of coronavirus is not a death knell for construction in 2020. Scientists are only just beginning to get a full grasp of its genetic make-up, severity and infectivity; and the prime minister has previously mentioned the worst of the crisis might be over within 12 weeks. Nonetheless, it’s worth considering what long-term impact the pandemic will have on the construction sector.

How has industry reacted?

The response from industry bodies has been impressive. Both the Civil Engineering Contractors Association and Build UK have begun offering across the board support to those affected, including administrative and government lobbying assistance. A few measures in particular are worth mentioning.

First of all, they are providing extensive professional assistance by positioning themselves as the conduit between the industry and Westminster, HMRC, investors and banks. In this increasingly complex period, it is necessary that firms have a clear grasp of — and have their say on — the direction of the country and economy.

On a more basic level, they have implemented health measures that are crucial to responding to a global health crisis of this kind. This includes splitting up working teams to slow the spread of the virus, reducing the amount of time leadership teams spend together, providing more extensive hygiene facilities on-site, and cancelling or moving meetings online.

On the legal side, they have offered information and consultation concerning how firms should approach contract changes, as the spread of coronavirus has become a ‘force majeure’ event. Most contracts include a clause, often a break clause, that voids the contract in the case of a major, uncontrollable world event. However, the party who seeks relief must prove the causation of how the event interrupted their ability to honour the contract — and in a globalised world of complex material supply chains, this may prove difficult.

CECA and Build UK have exemplified how industry bodies can take direct action to support firms when it is needed most. During an unprecedented time of change, this reassurance has been welcome.

Looking to the long-term

Over the last few months, the government has repeatedly reiterated how housing, construction and infrastructure will be at the forefront of its political agenda. In the lead-up to the winter election, for example, Boris Johnson promised to build a million news homes by 2025. Similarly, both Rishi Sunak and Sajid Javid offered a huge amount of investment in the sector over the course of the current parliament. Understandably, the health crisis has led to these promises becoming lesser priorities.

The government cannot be blamed for this — massive investment and focus will be required to combat the pandemic. However, the chronic imbalance between supply and demand in the UK’s housing stock persists and cannot continue to be overlooked.

As such, it will be necessary for the government to support the construction industry over the coming weeks and months with regular consultation and a continuous dialogue. Doing so will go some way to reassure firms about their plan for construction after the crisis abates, when a housebuilding revolution can commence. After all, demand for new housing will only continue to rise, and only with forthright government leadership and investment will the UK be able to meet it.

Financial reassurances from the state are vital, but private financiers also have a role to play. Property development finance firms are optimally placed, for example, to offer construction firms rapid access to capital when they need it.

After years of Brexit uncertainty, construction has developed resilience to political and social volatility, with many firms completing on projects even in the most arduous of circumstances. The spread of coronavirus arguably provides the sector with its largest challenge in a generation, but I am optimistic that in the long-term, it will be able to provide the housing stock the country needs. In the immediate term, greater government investment and dialogue will be necessary — as per their previous promises — to help us get through this difficult period.

Jamie Johnson is the CEO and co-founder of FJP Investment – a leading provider of UK and overseas property investment opportunities.



construction industry, COVID-19,Jamie Johnson

Chief executive

FJP Investments

+44 (0)207 183 0343


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