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Executive Summary
So far, 2020 has been an extremely damaging year for the Global Construction sector. Cancelled & delayed projects, thousands of construction professionals & workers have lost their jobs, unfortunately this disruption / slowdown will continue well into 2021. That being said, the COVID-19 outlook is still somewhat negative as we move into the 4th Q of 2020. However, we are starting to see slow but steady improvements in most countries construction sectors around the world. The current thinking is that things will be better in 3 months.
As of September 2020, COVID-19 has seen more than 28 million confirmed cases & close to 900,000 deaths around the world.
The countries most impacted by COVID-19 are:
- USA 5.7 million confirmed cases.
- Brazil 3.5 million confirmed cases.
- India 2.6 million confirmed cases.
- Russia 1.1 million confirmed cases.
- South Africa 0.6 million confirmed cases.
- Mexico 0.5 million confirmed cases.
- Peru 0.5 million confirmed cases.
Six months of dealing with COVID-19 has been major challenge to all Construction related organizations around the world & has cost construction related organizations billions of dollars in cancelled projects, mitigation cost measures & loss of profits.
The pandemic has “tapped” the brakes on future growth for possibly the next year or two. The pandemic has negatively impacted the economies and construction sectors of more than 180 of the world’s 200 countries. A handful of counties have successfully navigated around the pandemic, while many countries have significantly struggled with the virus.
Construction Owners, Architects & Engineering firms, Construction Managers, Contractors, Construction Professionals, Workers, Vendors & Suppliers have wrestled with the impact of COVID-19 for the last 6 months.
As we move into 2021 we are possibly moving into a new “normal” that still needs to be fully understood.
The COVID-19 virus has been responsible for anywhere from 30% to 60% of ongoing construction projects around the world to be closed down or delayed since mid-March, we are starting to see most construction work gradually starting up again as of September. The global economy and construction sector are going through a dangerous period. Most of the world’s economies are struggling with the effects of COVID-19. Nevertheless, we do expect a gradual & steady economic upturn as we transition into 2021.
Commercial / Residential Construction includes privately funded Single Family Homes, Apartments, Shopping Malls, Supermarkets, Offices, Hotels, School and Warehouse type projects are not expected to be severely impacted by COVID 19.
Industrial Facilities, Process Plants, Refineries, Manufacturing / Energy type projects, Government / State funded Civil-Engineering Roads, Bridges / Tunnel type projects and Governmental Institutional & Military type projects are in a different situation. Smaller work crews, continuous wearing of PPE that requires numerous water breaks / cool down periods, additional bussing requirements from worker parking area to actual site entrances, cleaning protocols & social distancing & additional site staff to ensure COVID-19 compliance are the root causes of this problem.
Industrial Construction projects will take longer to accomplish, a 12 month typical construction schedule will take anywhere from 14 to 15 months to complete post COVID-19.
The chart below indicates the regional market share for the year 2020, these values unfortunately are anticipated to contract by as much as 10% to 20% due to the COVID-19. We have indicated projected pre- Pandemic & post-Pandemic values. These values take into account both government / public works and private construction expenditures. We are forecasting a value of $7.25 Trillion as can be seen in the table below, a decline of 14%.
| # | Region | 2020 Value in Trillions $’s (Pre- Pandemic) | 2020 Value in Trillions $’s (Post Pandemic Forecast) |
|---|---|---|---|
| 1 | North America (USA / Canada / Mexico) | 2.17 | 1.95 |
| 2 | South America | 0.66 | 0.56 |
| 3 | Western Europe | 1.73 | 1.51 |
| 4 | Eastern Europe | 0.56 | 0.48 |
| 5 | Middle East | 0.67 | 0.57 |
| 6 | Africa | 0.28 | 0.24 |
| 7 | Asia / Australia (China / India / Japan / Australia / New Zealand / Other S.E. Countries) | 2.18 | 1.94 |
| Total | 8.25 | 7.25 |
Current world political & economic risks & issues include:
- Discovering an effective COVID-19 vaccine and how it can be manufactured & dispensed to tens of millions of people around the world. Are there enough vaccine production facilities to meet this challenge?
- The elimination of the COVID-19 pandemic. The worldwide economic impact of the COVID-19 still needs to fully play out before realistic projections can be made.
- The ongoing confrontational interactions of China with India, Taiwan, the USA & the countries bordering the South China Sea.
- The possibility of an all-out trade war between China and the US is still a possibility, as the US pins the blame of COVID-19 on China. It would appear that we are entering a new Cold War between the US and China.
- The ongoing social unrest in the USA.
- The outcome of a possible disputed US Presidential Election.
- North Korea continues to be a wild card, is Kim Jong-un alive or dead?
- The possibility of a prolonged Global Recession.
- A persistent lack of consumer confidence that could last for more than a year or two.
- The loss of construction worker productivity on Industrial Construction projects related to social distancing, new safety rules & the need for personal protection.
- Lack of future CAPEX funding & investment.
If the majority of these concerns can be resolved or put to rest, then the international construction market has an excellent chance to grow & prosper in the next 2 to 5 years particularly in some of the 2nd & 3rd world developing economies of South East Asia, Africa & South America. However, the current global war on the COVID-19 needs to be won before this can be realized.
| Countries | 4 th Q 2020 % GDP Growth | 4 th Q 2020 Inflation % | 4 th Q 2020 Unemployment % | Comments on Construction in 4 th Q of 2020 Future Spending Activity |
|---|---|---|---|---|
| USA | Zero to 0.5 | 0.7 – 1.3 | 7.5 – 9.5 | Unemployment is decreasing rather rapidly. The 4 th Q of 2020 will continue to be challenging as the US construction sector tries to come to terms with the pandemic & the new normal. Engineering & Architectural firms are reporting a significant fall off of RFQ’s / new orders as we move into the 4th Q of 2020. The good news is that we are starting to see some positive US economic news, COVID-19 confirmed cases are starting to reduce substantially. |
| CANADA | Zero to 0.5 | 0.2 – 0.5 | September 11, 2020 | Unfortunately, the COVID-19 virus has the potential for many Canadian future or ongoing construction projects to be delayed or the worst case cancelled. Look for construction unemployment to rise in the next month or two. Canadian Engineering & Architectural firms are reporting a drop in new RFQ’s / Bidding opportunities as we move into the 4th Q of 2020. |
| BRAZIL | Minus 4% to Minus 5% | 2.5 – 3.5 | 13 – 15 | Brazil now has the 3 rd largest number of COVID-19 deaths. The full scale of the economic impact of the deadly COVID-19 on Brazil is still TBD. Regrettably, COVID-19 has the potential for all Brazilian future or ongoing construction projects to be delayed, deferred or cancelled. Look for construction unemployment to increase in the next month or two. 2021 construction activity looks to be down from pre-COVID-19 levels. A/E & CM l firms are reporting a sizable drop off in RFQ’s / Bidding opportunities / new orders as we move into the 4th Q of 2020. |
| UNITED KINGDOM | Minus 4% to Minus 6% | 0.8 – 1.5 | 4.5 – 6.5 | The UK has now entered a full blown recession, this & the ongoing Brexit closeout issues will take some skilled navigation to come to a good outcome. New retail construction, hotels and office construction will be in the doldrums for at least the next 12 to 18 months. This virus has the potential for all UK future or ongoing construction projects to be delayed or the worst case situation cancelled. Look for construction unemployment to increase in the next month or two. Engineering, Architectural, Construction Managers & Contractors are seeing less RFQ’s / Bidding opportunities as we move into the 4th Q of 2020. |
| GERMANY | Minus 2.5% to Minus 5% | 0.2 – 0.5 | 4.5 – 6.5 | Engineering & Architectural firms are reporting a significant fall off of RFQ’s / new orders as we move into the 4th Q of 2020. Germany, the engine of Europe, has a high probability of falling into a recession later in 2020. The COVID-19 has the potential for the majority of German future or ongoing construction projects to be delayed or the worst case cancelled. Look for construction unemployment to increase rather rapidly in the next month or two. The German economy has seen its deepest deterioration on record, the total production of goods & services declined by more than 10% in the April to June period. |
| FRANCE | Minus 3% to Minus 7% | 0.8 – 1.3 | 7.5 – 8.5 | France has struggled with high unemployment since 2008. COVID-19 is an additional challenge. The full scale of the economic impact of the deadly COVID-19 on France is still TBD. This virus couldn’t have come at a worse time as France has struggled economically for the last 12 years. The Coronavirus Pandemic has the potential for all French future or ongoing construction projects to be delayed or the worst case shelved. Look for construction unemployment to increase rather quickly in the next month or two. Engineering & Architectural firms are reporting a significant fall off of RFQ’s / new orders as we move into the 4th Q of 2020. |
| RUSSIA | Minus 3% to Minus 6% | 3.3 – 3.8 | 6.2- 7.5 | Russia announced in August that it had produced a COVID-19 vaccine that will go into full production in September. Russia is starting to see larger numbers of COVID-19 cases, currently reporting over one million confirmed cases and more than 17,000 deaths. Russia has been hard hit by the pandemic. A severe fall in the Russian Ruble after the dramatic oil price drop is still TBD. The ramifications of the global economic impact of the deadly COVID-19 is still to emerge in Russia. The virus has the potential for all Russian future or ongoing construction projects to be delayed or the worst case cancelled. Look for construction unemployment to increase rather quickly in the next month or two. |
| JAPAN | Minus 1.5% to Minus 2.5% | 0.1 – 0.3 | 2.5 – 3.3 | The Japanese economy is still underperforming. The 2020 Olympic games have been cancelled until 2021 The full scale of the global economic impact of the deadly Coronavirus Pandemic on Japanese construction is still to emerge. Unfortunately the Coronavirus Pandemic has the potential for all Japanese future or ongoing construction projects to be delayed or the worst case cancelled. Construction unemployment to set to increase in the next month or two. Japan has performed reasonably well in dealing with the pandemic. |
| CHINA | 2.7 to 3.3 | 2.5 – 2.9 | 3.5 – 4.2 | The Chinese economy & construction sectors are starting see decent growth again, not as good as pre-COVID-19 levels, but still positive. The ramifications of the global economic impact of the deadly Coronavirus Pandemic is still TBD. The Coronavirus Pandemic has the potential for all Chinese future or ongoing construction projects to be delayed or the worst case cancelled. Look for construction unemployment to increase rather rapidly in the next month or two. Construction activity is starting up rather strongly in most regions. |
| INDIA | 0.5 – 1.5 | 5.5 – 7.2 | 7.5 – 8.5 | The potential of hostilities with China is a major concern. India has been hard hit with more than 2.4 million confirmed cases of COVID-19. Many Indian planned or ongoing construction projects need to be reevaluated, delayed or in the most unpleasant case canceled. Look for construction unemployment to increase rather rapidly in the next month or two. Prime Minister Narendra Modi has earmarked a $2 billion fund to mitigate the effects of the Coronavirus Pandemic on the Indian population & industry. |
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To contact the Author of this newsletter or to enquire about our Cost Saving services, contact John G. McConville CCP – in USA call (609) 577 4505 or contact me at [email protected]
