11 January 2022
2021: A year of challenges for construction

Just over a year ago, as December ticked over into January and 2020 became 2021, we all hoped that the worst would soon be over. However, the economic repercussions of the coronavirus pandemic continued to bite, while disruption to supply chains across the globe dominated headlines.

It’s been a year of challenges for the construction industry, but challenges are there to be surmounted. In our first blog of 2022, we round up some of the biggest stories of 2021 and look ahead to the future.

  • Materials shortages intensify

Concerns about the supply of vital construction materials escalated in early 2021, with a resultant impact on prices. Statistics from the Department for Business, Energy and Industrial Strategy (BEIS) revealed that prices for building work had soared by 24.5% in the year to October 2021.

In April, the Construction Leadership Council issued its first Construction Product Availability statement, saying that “the availability issues we are currently experiencing are likely to worsen before they improve.” Materials noted to be in short supply included plastics, cements and aggregates, in addition to timber, steel, roof tiles, bricks and imported products. A further statement in June reported that global demand continued to vastly outstrip supply for many products, putting supply chains under pressure and intensifying shortages. A shortage of haulage drivers was also mentioned as a critical issue. Fast-forwarding to October, the CLC’s statement on the 27th of the month reported a softening of global demand and an improvement in product supply in some areas, while the latest report (21 December) noted an improvement in the supply situation across the UK – although significant challenges and uncertainty remain.

  • NMCN goes into administration

The biggest collapse since construction giant Carillion went under in 2018, NMCN plc crumbled after failing to secure a refinancing of the business. Following months of profit warnings and huge losses, NMCN finally folded in October 2021 and administrators were called in. While the past couple of years have challenged the vast majority of businesses, NMCN’s woes were not primarily COVID-19 related. Instead, the loss of key board members, combined with several problem contracts, were blamed for the firm’s downfall.

NMCN was not the only firm to go under in 2021. Somerset-based Henry W Pollard collapsed in June, while Welsh firm WRW Construction went into administration in July, owing £13m to its trade creditors.

  • HS2 branded ‘unachievable’

There was a further setback for the beleaguered HS2 high-speed rail project in July as it was branded “unachievable” by the government’s Infrastructure and Projects Authority (IPA), along with Crossrail, the western section of East West Rail and two other major infrastructure projects. These projects were classified as ‘red’, meaning that their completion on time and to budget appeared to be impossible.

The project saw further controversy in November as it was announced that the eastern leg of HS2’s phase 2b route (between Birmingham and Leeds) had been scrapped, as well as plans for a new high-speed line between Leeds and Manchester.

  • Grenfell inquiry continues

The inquiry into the 2017 Grenfell Tower fire, which took 72 lives, continued to hear evidence in 2021 amid increased demand from survivors for criminal charges to be brought. In October, the inquiry heard that the London Fire Brigade had failed to collect basic information, leading to residents remaining in the building even as smoke seeped under their doors. In December, it heard that successive governments had concealed the severity of fire safety risks to high rise buildings. And throughout the year, it repeatedly heard evidence of failed cladding safety tests and ignored safety warnings in the years leading up to the fire. Recently, housing secretary Michael Gove moved to block Rydon Homes, a company involved in the refurbishment of Grenfell Tower prior to the disaster, from the government’s Help to Buy scheme following “concerns over unacceptable business practices in their company group.”

Meanwhile, stories about residents trapped in dangerous and worthless homes due to the cladding crisis continued to hit the headlines.

  • “Further growth over the next two years”

Despite a rather gloomy year, Glenigan’s Construction Industry Forecast for 2022-2023, published late last year, offers a ray of hope. In spite of the problems plaguing many firms last year, construction activity managed to grow by 11% in 2021, to be followed by a more subdued but nevertheless respectable growth of 7% and 5% in 2022 and 2023, respectively. This growth is set to lift the value of underlying project starts to a total of £61bn by 2023 – 3% above pre-pandemic levels.

According to the report, this recovery is set to be driven by a strong upturn in health and industrial projects, an upswing in private and social residential activity, and the belated recovery of the hospitality and leisure sectors.

For more construction industry news, updates from the insurance sector, and insightful articles across a broad range of topics, keep following the Focus blog as we move into 2022!