These are some of the key findings from the SCSI-PwC report 'Construction Market Monitor 2020' published. Based on the views of 300 chartered surveyors as well as input from other industry participants, the research shows the sudden impact which COVID-19 has had on the construction sector with sentiment regarding activity levels, profits and outlook shifting dramatically from positive to negative.
Chartered Surveyors involved in the construction sector believe COVID-19 has resulted in a 20% decrease in activity levels while over half expect to see a decrease in workloads over the next 12 months.
Over two-thirds of surveyors expect a decrease in profit while seven out of ten hold a negative or neutral outlook for activity in the construction sector for the next 12 months.
These are among the key findings of the fourth edition of the Society of Chartered Surveyors Ireland and PwC Construction Market Monitor.
Almost 300 surveyors were canvassed in February for their views, but due to the unprecedented impact of COVID-19, respondents were surveyed again in June. As such the findings capture both the pre- and post-COVID-19 views of participants and the sea change in sentiment towards the sector which occurred over that four-month period.
When surveyed in February, 67% of the surveyors who took part expected to see an increase in workloads over the coming 12 months and only 8% expected to see a decrease. Fast forward to June and 51% expect to see a decrease while only 22% anticipate an increase.
In February only 12% of respondents believed that profits would decline. But by June and after three months of lockdown and site closures that figure has jumped to 69%.
Micheál Mahon the President of the SCSI said that while the sector had done well to weather the initial impact of COVID-19, the findings raise serious concerns for the future.
"The building, project management, quantity and planning surveyors who took part in this survey are very well placed to capture the expected pipeline activity over the next 6-12 months. If they are not seeing positive activity levels now, this will translate to a challenging year in respect of residential and non-residential building activity".
Micheál Mahon continued: "The vast majority of surveyors who participated in the survey believe the pandemic will exacerbate the difficulties in raising development finance. They identified the viability of projects, access to bank credit, and cash flow or liquidity constraints as the top three issues contributing to difficulties in this area. Furthermore, they identified financial constraints on consumers and clients as potentially having the biggest impact on building activity in the coming months. Additionally, while measures relating to COVID-19, such as increased sanitation facilities, PPE gear and training, will add to the bottom line, of greater concern are the costs of project delays, which will need to be monitored".
Sinéad Lew Senior Manager in the PwC Construction and Real Estate practice commented: "In February, 80% of surveyors reported an under supply of skills across most construction trades and professions. COVID-19 is likely to have exacerbated the issue with large numbers of overseas workers who were based here returning home".
"The survey also reports that 61% of surveyors saw the crisis as leading to increased investment in digitalisation or automation within their firms. This is a very positive development. However, in order for there to be long-lasting change, increased use of technology needs to occur right across the construction supply chain as well upskilling the workforce for a digital world. Appropriate training and financial incentives need to be made available so that smaller companies, in particular, can be supported and encouraged to innovate and digitalise. While we welcome the education and training measures announced in the July Stimulus, in Budget 2021 we would also welcome a tax relief for employers based on the cost of upskilling employees as a result of operational changes brought about by COVID-19".
Just 9% of respondents said that they are 'well prepared' for Brexit. Despite ongoing negotiations, it looks increasingly likely that the UK will leave the EU without a deal on the 31st of December 2020 resulting in great disruption to trade, supply chains and increasing costs and job losses for the businesses impacted.
Sinéad Lew said, "In the construction sector we have thus far seen a widespread 'wait and see' approach to Brexit. Construction firms have no more time to wait and need to take action now to prepare to operate in a post-Brexit era. Some of these actions include preparing for customs authorisations, investing in customs expertise, reviewing potential cash flow constraints, developing contingency plans to mitigate border delays and reducing customs duties as well as checking the workforce and any immigration permits needed".
In February, 77% of respondents had a somewhat positive or very positive outlook for construction market activity while 9% had a somewhat negative or very negative view. By June in stark contrast the overall positive figure has fallen to 25% while the negative figure has jumped to 52%.
Micheál Mahon pointed out that with a combined output of over €25 billion annually, the construction sector is the backbone of our economic growth and attracts significant foreign direct investment into Ireland. He said these findings provided an early warning signal to the Government and it was incumbent on them to act.
"If the State was to embark on a large-scale public sector house building programme, it would help to address our chronic shortage of housing while also availing of softening construction costs".
"Because of the long-term nature of construction projects, the sector places a huge value on economic certainty and consumer confidence. Unfortunately, both have been badly hit by COVID-19 and that is why it is so important that the Government continues to invest in the strategic objectives as outlined in Project Ireland 2040".
Sinéad Lew concluded: "At a national level, tackling the green agenda will be critical for generations to come and construction has a part to play. We welcome the Government's commitment to a new national domestic retrofitting scheme made in the Programme for Government. This is a very positive step and should also lead to job creation in the sector going forward".
For further Information contact Johanna Dehaene.
This report has been informed and guided by the views, perceptions and opinions of almost 300 chartered surveyors as well as input from other industry participants. In addition to interviews, the research included online surveys which were conducted in February and June 2020. These professionals work in the property and construction markets in large corporate firms, construction agencies, government bodies and financial institutions. The surveyors are a mix of quantity, planning and development, building and project management-chartered surveyors. SCSI and PwC would like to thank all those who contributed to the research.
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