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44 Summer 2021 CONSTRUCTION SECTOR SET TO BENEFIT AS THE PLANNING ENVIRONMENT RECOVERS SUMMER 2021 In association with HAE ECONOMIC CONDITIONS April brought the usual changeable weather but also saw the UK’s citizens emerge from a 3-month nationwide lockdown, blinking in the sunlit uplands to enjoy an al-fresco pint in freezing temperatures, a socially distanced gymworkout and a high-street shopping trip. A successful vaccine rollout, low infection rates and a phased removal of movement restrictions has led to optimism over the prospects for the economy over the next few months. Many of those una ected by the pandemic have built up signi cant levels of savings that are ready to be spent on the high street, meals out and trips away. Moreover, at the Budget in March, the government signalled it would continue emergency support measures until the autumn, banking on the economic recovery being well-established by then. This announcement provided welcome certainty for workers and businesses and avoided a disastrous cli -edge that would have seen large increases in unemployment and business insolvencies. However, while it included some new ideas, the scale was missing that matches the government’s “levelling up” rhetoric with real-life policy. A good example of this is our infrastructure contract awards data: with a new public spending period agreed, infrastructure awards increased to historically average levels for much of 2020, with investment particularly noticeable in roads and rail (HS2). However over Q4 of 2020 and Q1 of 2021 the value of awards has fallen again, and the pipeline is looking weaker outside the short term. Until we start to see increases of a di erent order of magnitude, declarations of “levelling up” look implausible. BREXIT The country has also been adjusting to a post-Brexit world. Signi cant delays in imports of goods and materials are being experienced across all sectors, as companies struggle to deal with the additional red tape from the thin deal. Trade fell by 14% in January and staged a partial recovery in February, growing by 6%, but has not recovered to previous levels since. As we report later in this edition, the demand for warehousing is at record levels. Where trade will ultimately stabilise remains unclear. In ation is now occurring but again its ultimate magnitude or how long it lasts remains uncertain. Concerns are also growing around the availability of labour. We will have to wait until the impact on trade, in ation and labour becomes clearer over the coming months. GDP GDP contracted by 2.2% in January, a smaller fall than most commentators had predicted. As expected, the services sector fell the most, contracting by 2.4% due to the closure of non-essential retail, leisure, and hospitality. Since then it has recovered, however output was 3.4% below pre-pandemic levels. EXPECTATIONS FOR THE NEAR FUTURE Rightly, expectations are for a bounce back in activity over the coming months. However there remain many risks: • increases in Covid-19 infections and vaccine-resistant strains will put back or derail the recovery, • business failures and redundancies increase as support measures are withdrawn • Brexit-related impacts continuing or intensifying over the coming months • uncertainty at what ultimate level the economy will recover to as social distancing restrictions will be required for the foreseeable future. CONSTRUCTION The construction industry deserves great credit for getting back to work after the scale of site closures during the rst nationwide lockdown and achieving a level of productivity under social distancing measures. Construction output broadly returned to March 2020 levels in September last year. It has weakened slightly since and from October remains 5-10% below the industry’s previous highs in 2019.