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March 17, 2020

Construction work halted on key site in the UK: a harbinger of further disruption?

Although the UK Government has thus far avoided taking the drastic measures implemented by other European markets to try to contain the spread of the coronavirus, there are already signs that the virus outbreak is adversely affecting the construction industry in the UK, with the risk of works on major projects being halted.

Lendlease, a multinational construction company, announced on 13 March that work on its Google headquarters project would be temporarily suspended following a worker testing positive for the coronavirus. The UK construction project is worth an estimated £1bn ($1.3bn), the temporary halting of this project will be a worrying sign of things to come in the industry as the virus outbreak worsens in the country.

The construction industry is particularly at risk from the spread of the virus due to the nature of work: while many offices can instruct their employees to self-isolate and work remotely, once self-isolation takes place at a work site, all project work is halted. For this reason, the construction industry, along with hospitality and tourism, are likely to be the most severely impacted sectors by the spread of the coronavirus. More projects are expected to be temporarily halted, ushering in a difficult period for the construction industry.

GlobalData has revised down its forecast for construction output growth in 2020 to 0.8%, from 1.0% previously. However, stimulus measures are being provided to support the economy and reassure investors. The Bank of England recently cut interest rates by 50 basis points to 0.25% and announced measures to support lending to small and medium sized businesses. In his budget announcement on 11 March, the Chancellor, Rishi Sunak, revealed plans for the biggest infrastructure spending increase since the financial crisis. The increase in spending for key infrastructure such as roads and railways and also for new homes is expected to support growth in the construction industry once the impact of the coronavirus subsides.

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