Site closures could see Scottish output halve in three months
09 Apr 2020 By Megan Kelly
Scotland’s construction output could be cut in half due to the government’s coronavirus restrictions, which have said all non-essential sites should close.
A study by the University of Strathclyde’s Fraser of Allander Institute (FAI) has estimated that the industry’s output would decline by 40-50 per cent if the new restrictions continued for three months. The guidance from the Scottish Government, issued on Monday, has caused the likes of Bam, Kier and Morgan Sindall to stop works. Only essential projects such as hospitals, road, rail and utility repairs may continue.
By analysing data from the Office for National Statistics (ONS) and workforce jobs levels (WFJ), the Scottish institute found that falls in output will be felt initially, but that the true scope of the shutdown of construction, which accounts for around 6 per cent of the economy, may not be fully felt until later in the year. The FAI estimated this could contribute to Scottish GDP contracting by around 25 per cent, but added that it will avoid providing an exact forecast for what the economy will look like over the next year as there is “simply too much uncertainty around both the virus and the response of the economy”.
The report stated: “On balance, we’re seeing a shutdown in much of the housebuilding industry, and the mothballing of a large part of private construction infrastructure and repair. We assume that public infrastructure investment continues at its normal level. [This is] likely to be too optimistic, but this will also capture any additional demand for emergency construction work to escalate.
“Overall, if the restrictions were to continue over a three-month period, and based upon the split of current activity, this would be pointing to a contraction in construction of as much as 40 to 50 per cent.”
The institute said that the impact on construction will continue to evolve as more companies furlough staff and shut down operations. The Scottish Government will review its guidance after three weeks.
The coronavirus has already had a drastic impact on the construction sector in the UK, with output in March plummeting at the fastest rate since April 2009, according to new PMI data revealed earlier this week.