In the post-pandemic period, can the construction industry become a catalyst for economic recovery? David Edwards of Place-Make believes it can
While the health and social care, food and transportation industries battle to get us through this period, the construction sector, like many others, watches on with a mix of concern, hope, nervousness and, above all, gratitude.
In what remains a critical phase in the nation’s response to COVID-19, it is difficult to think of anything other than the task at hand – simply to arrive at a post-pandemic period will be enough for now. However, with some positive signs emerging from Southern Europe and parts of the Far East returning to some semblance of normality, perhaps we can begin to think about what the ‘next’ phase might be and our role within this.
The recovery phase
In the first instance, a quick start for the hospitality, tourism and service industries is anticipated (the prospect of this must be keeping many of us going at this time). Media and entertainment will have a vital role to play in uplifting our collective mood while education, manufacturing and production will presumably experience a sharp uplift to make up for lost time.
For those of us in the construction industry, our role in the recovery phase is less apparent. Overall, the industry contributes up to 6% of the UK’s GDP, 7% of jobs and 13% of businesses. By the end of 2019, the industry was experiencing a period of growth, balancing falls in retail, production and manufacturing. According to the Office for National Statistics (ONS), output increased by 1.4% in the three months to January 2020, compared with the previous quarter. Of this, 2.4% was attributed to an increase in new work. Average salaries across the industry were rising, new build housing in Scotland was at a 12-year high and in Ireland, the volume of output in building and construction had increased by 14.6% compared to the same period in 2018.
With the prospect of some stability post-Brexit, projections were for sustained growth through 2020 and into the following year. As recently as a month ago, a positive Budget for construction saw the new chancellor announcing: “If the country needs it, we will build it.”
We looked to be embarking on a new age of strategic growth that would be stimulated by government investment in new housing and infrastructure and optimism for both the sector and the economy was high. Barely a month on, the physical, social and economic landscape looks quite different.
Economic ties
Typically, the fortunes of the construction industry are tied to the economy; a buoyant economy supports investment, growth and expansion and vice versa. Unfortunately, with the economic impact of the virus as yet unknown, the indication is worrying for an industry that was just beginning to find its feet again.
The collective response to Covid-19 has been likened to being in a physical war and by the end of it, the same might also be said of the state of the economy. By 1945, the situation was dire; the UK entered the Second World War with mass unemployment and poverty after years of depression. By the end of it, financial reserves had been extinguished and the country was completely broke.
Presently, national debt equates to 79.1% of GDP but in the 1940s, this peaked at 230%. However, with emergency measures likely to result in an increase in borrowing coupled with a potential reduction in GDP of up to 35%, the post-pandemic economy is likely to face similar challenges to those of the late 1940s.
Significantly, what then followed was a period of sustained growth that continued through the 1950s and 1960s. In what became known as the Golden Age, the NHS and the welfare state were established and employment, salaries and living standards all rose. In his infamous speech of 1957, Prime Minister Harold Macmillan declared: “Let us be frank about it: most of our people have never had it so good. Go round the country, go to the industrial towns, go to the farms and you will see a state of prosperity such as we have never had in my lifetime – nor indeed in the history of this country.”
Construction also flourished during this time. However, rather than being a benefactor, the industry was used to drive and regulate the economy during the Golden Age. At the core of this was the adoption of Keynesian economic principles – greater government investment in infrastructure, welfare and education kick-started the economy by stimulating growth, job creation and spending.
An ambitious construction programme was embarked on, involving a number of seminal initiatives that we are still benefiting from today. This included the New Towns Act of 1946 and the first wave of settlements from Harlow in Essex to Peterlee in County Durham; the regeneration of London’s South Bank, paving the way for the Festival of Britain in 1951; the first motorways – the M6 (1958) and the M1 (1959); the completion of three new runways at Heathrow Airport and the renovation of Gatwick, Newcastle, Manchester, Cardiff and Birmingham airports to cater for passenger travel; the formation of British Rail, upgrading the network for diesel and electric trains and the introduction of high-speed Inter City services; and also the commitment of funding for the planning and design of the Humber and Severn bridges, the Kingsway Mersey Tunnel and the Thames Barrier.
These projects were in addition to the second wave of civic universities that saw the number of institutions across the UK double from 22 to 45 in the 1960s, the Hospital Plan of 1962, which created a hierarchy of facilities to home the new NHS and a multitude of employment-generating activities on war-scarred sites across the UK.
At the end of this very difficult period, many of the challenges of our time will still exist: the need for more homes; the renewal of our retail and commercial centres; sensitive urban regeneration; upgrading existing transport networks and connecting new places; building resilience to the impact of climate change and transitioning to a cleaner, greener and more sustainable built environment.
With some strategic support and the same spirit of collaboration, once again the construction industry is ready and waiting to pick up the baton in the post-recovery stage and carry this towards economic recovery.
David Edwards
Director
Place-Make
+44 (0)1462 510 099
