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Impact of COVID-19 on the Global Construction Industry with Forecasts to 2021


According to Researchandmarkets.com, the global construction market size is expected to decline from USD 11,217.4 billion in 2019 to USD 10,566.8 billion in 2020. However, the industry will show signs of recovery in 2021 and reach a market size of USD 11,496.7 billion, projecting a CAGR of 1.2% between 2019 and 2021.


An increase in automation in public spaces, along with the rising awareness about antibacterial construction materials, is expected to boost the construction industry post-COVID-19 pandemic. However, the shutdown of manufacturing facilities, the non-availability of raw materials, and the impact on supply chain and logistics are expected to restrain the industry growth.


The COVID-19 pandemic has created many challenges for several businesses, governments, organizations, and societies around the world. Companies working in different sectors are reacting in different ways to ensure business continuity, supply chain flexibility, and other such measures to innovative ways to generate revenue. The uncertainties with regard to this pandemic have affected the heavy & civil engineering sector.


Despite the effects of COVID-19, a few civil engineering activities have been maintained to some extent and are likely to continue in the very short term. There is no complete lockdown in several countries, and hence, companies are willing to continue executing their contracts to avoid liquidation damages. However, these activities are expected to halt soon, as supply chains are disrupted by a shortage of equipment and materials. In addition, public agencies and administrations are beginning to terminate contracts to control expenses.


According to EIC Federation, the impacts of the virus on the global construction business might prove to be detrimental. Contractors are at the forefront as they are service and product providers at the same time. Covid-19 affects both material and labor, key cost components of construction projects, and by doing so, challenge on-going project delivery, companies’ liquidity, and whole business models.


Impact on construction 1: HEALTH, SAFETY, AND EMPLOYMENT

  • All-of-society quarantines have resulted in a full stall of different sized construction sites and partially non-operational business to effectively apply social distance in a unified effort to limit a further outbreak

  • In addition to physical wellness, contractors are considering mental health care following reports on anxiety among workers

  • Contractors currently prepare the introduction of short-term working conditions to circumvent dismissals

Impact on construction 2: DELAYS IN CONSTRUCTION MATERIAL SUPPLIES

  • Many countries such as China and Italy have slowed or shut down their production sectors leading to forecasts of a sharp decrease in the production of a wide range of materials ranging from steel to cement

  • Contractors that rely on Chinese-made goods and materials are likely to be faced with higher costs and, caused by shortages of construction material, slower project completion. This, in turn, implies higher prices and more projects canceled.

  • Limited public transportation and travel bans slow down project delivery as sub-contractors are not able to perform or provide the required material

  • While works are stalled, equipment rental companies are starting to face problems with equipment left on inoperative sites

Impact on construction 3: LEGAL AND ADMINISTRATIVE

  • Contractors may be faced with dramatic turbulences alongside their supply chains. With smaller companies facing the real risk of bankruptcy, major contractors will be forced into legal disputes over non-deliverance and “empty” spending

  • Quarantine periods across the world vary in length. The uptake of cross-border projects will require a higher administrative burden

  • Contractors should be mindful to claim possible time and financial coverage entitlement as early as possible

  • Borrowers may make back-to-back force majeure claims under concession agreements to avoid breaching milestone completion dates and incurring liability for liquidated damages

Impact on construction 4: DISTORTED DEMAND AND DETERRED FINANCIERS

  • Many countries have introduced financial support instruments of unprecedented scope to cover losses of revenue, but on-going expenses, the lack of income, a prospect of client insolvency, or possible inabilities to claim “force majeure” will put a huge financial burden on the sector

  • As production output is expected to decrease by 20-40%, investment in public infrastructure is likely to fall off the table. Such development has the potential to hit hard on contractors specialized in non-viable public infrastructure

  • With the real risk of financing drying up in the developing world, contractors may be faced with various challenges including

  1. Lack of payment for ongoing and lack of financing for future projects

  2. Suspension of manufacturing/worksites

  3. Travel restrictions and less welfare support available to workers

  4. Cost overruns and delays

  • Governments are implementing short term export credit insurances to cover losses in exports of goods and services

Amid to this COVID-19 pandemic, the only way to resurrect the construction industry is through vaccination. As WHO and partners work together on the response, tracking the pandemic, advising on critical interventions, distributing vital medical supplies to those in need they are racing to develop and deploy safe and effective vaccines.


Vaccines save millions of lives each year. Vaccines work by training and preparing the body’s natural defenses the immune system to recognize and fight off the viruses and bacteria they target. If the body is exposed to those disease-causing germs later, the body is immediately ready to destroy them, preventing illness.


There are currently more than 50 COVID-19 vaccine candidates in trials. WHO is working in collaboration with scientists, business, and global health organizations through the ACT Accelerator to speed up the pandemic response. When a safe and effective vaccine is found, COVAX (led by WHO, GAVI, and CEPI) will facilitate the equitable access and distribution of these vaccines to protect people in all countries. People most at risk will be prioritized. While we work towards rolling out a safe and effective vaccine fairly, we must continue the essential public health actions to suppress transmission and reduce mortality.

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