UPDATE: UK Construction Copes With Mixed Guidance on COVID-19 Lockdown
As China's COVID-19 epidemic shows signs of stabilizing and industrial and construction work resume, Europe has become the new epicenter of what now is a global pandemic—with major recent spikes in cases, particularly in Italy and Spain, and new construction restrictions in various countries ordered by authorities or self-imposed by industry.
The U.K. is the latest European nation to boost restrictions, on March 23, as confirmed cases topped 6,600 and known deaths now number 330.
Prime Minister Boris Johndson closed all but essential stores and businesses, ordered most workers to stay home and short-stay citizens traveling abroad to return, banned public gatherings of more than two unrelated people and set a 2-meter social distance rule.
The mandate, initially to last three weeks, appears to exempt workers in construction, manufacturing and health care, according to Prime Minister Boris Johnson.
But lack of clarity has left many owners and firms unsure of how to proceed, with some moving independently to close project sites.
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According to global tracking by Johns Hopkins University and other sources, cases in European countries totaled close to 190,000 as of March 22, with nearly 8,700 confirmed deaths.
Italy has been particularly hard hit, with confirmed cases now close to 53,000 and nearly 800 deaths reported on March 22—now the world's highest one-day fatality rate that exceeds any China total.
The situation spurred Prime Minister Giuseppe Conte to announce on March 21 much stricter measures, including closure of all business operations except for "essential supply chains." The country's 60 million people already have been in lockdown since March 12, with the military now called up to enforce it.
Work on building sites will be stopped except for hospitals, roads and railways, he said.
Officials in the northern region of Lombardy, the worst-affected area with at least 3,095 deaths, had pressured the national government for added restrictions. The region now has closed all hotels except those supporting emergency response and banned outdoor exercise.
“There is no alternative," Conte said. "This is the most difficult crisis that the country has faced since World War II.”
A new field hospital is planned in Bergamo in the region, while Remo Ruffini, chairman and CEO of luxury sportswear maker Moncler, announced he would donate $10.8 million to the government for construction of a new hospital in Milan with more than 400 intensive care units.
Italian contractors’ association, Associazione Nazionale Costruttori Edili (ANCE), had asked the government to suspend all worksites, with President Gabriele Buia saying that construction companies could not provide workers with required health and safety protections.
According to Buia, personal protective equipment was in short supply and was needed by healthcare workers, with major gaps in the supply chain.
Italian aerial work platform manufacturer Palazzani has closed most of its operations, with limited staff on site to expedite work for export only, say media reports.
ANCE wants the government to extend to the industry a “social safety net” by suspending worker paycheck deductions and offering employers immediate payments to preserve liquidity.
Completion of the new Genoa Bridge—the $220-million, 1,067-m-long steel and concrete structure that replaces the viaduct that collapsed on Aug. 14, 2018, causing 43 deaths—continues its race against time. Fincantieri Infrastructure has placed the 1,800-tonne, 94-m-long fabrication between pier top sections forming the 100-m span. Partner Salini Impregilo completed the last of 18 concrete piers.
The firms have committed to complete the new bridge by summer, but a Salini Impregilo spokesman declined to confirm the current schedule or how new work restrictions are affecting its other projects in the country or elsewhere.
Massimo Ferrari, Salini Impregilo's corporate and finance general manager, told investors on March 11 that all of its sites were operating at the time, despite the COVID-19 effects in Italy and in other global locations, but he said the pandemic would have an impact on the company if it continues for more months.
Salini Impregilo erected a light beam structure that was illuminated on March 21, to be repeated each evening, "to continue to transmit day after day to the whole country ... a message of hope and momentum ... with a great sense of responsibility even in complex situations such as the one we are experiencing right now," the firm said.
Other Virus Hotspots
Meanwhile, in Spain, the national health ministry reported a 32% spike in confirmed COVID-19 deaths, to 1,720, the second highest in Europe, and 28,572 total cases as of March 22, including opera singer Placido Domingo.
UK homebuilder Taylor Wimpey said last week it has shut down all of its Spanish construction sites
Prime Minister Pedro Sanchez said March 22 that he would extend to April 11 an initial two-week national lockdown begun on March 14, and called on the European Union to enact a major economic recovery effort.
"We need to articulate a grand Marshall Plan of reconstruction,” he said.
Spain’s military has been tapped to convert convention centers in Madrid and Barcelona to field hospitals with 5,500 beds.
In France, the country's largest contractor, Vinci Group, said on its Facebook social media page, that In countries where lockdown has been declared, its units "have immediately implemented telework for employees whose activity can be carried out remotely.
France's Vinci Reports Impacts
France’s largest contractor is taking a hit from the virus not only in construction but also in its airports and highways operations concessions businesses. But with deep pockets, it intends to be positioned to recover quicklym" it said.
The firm has shut numerous sites in France, where it reports 60% of sales, to comply with government containment measures. Along with other contractors, it is attempting to reach agreement with authorities on gradual resumption of work. Outside France, the company is able to maintain activities, particularly in other European countries, Southeast Asia, Oceania, the Middle East, Africa and Latin America,
However, Vinci has seen a sharp fall in its concessions business that last year accounted for nearly 18% of the group’s $52 billion sales. After maintaining traffic levels until last month at the airports, they experienced a 40% drop in the first three weeks of March.
The company operates 24 airports in France, Brazil, Chile, Costa Rica, Cambodia, Dominican Republic, Japan, Portugal, Serbia, Sweden, the U.K., and the U.S. Vinci’s largely French toll road business has experienced a nearly 20% fall of in light vehicles, while freight traffic remains at roughly the same levels.
As a result of these setbacks, the group forecasts “a pronounced but time-limited decline in its revenue.”
Vinci reports an all-time record backlog of $41 billion, $7 billion net cash at the end of February and has an unused $8.6-billion credit facility not due to expire until November 2024.
The French contractors’ association Federation Française du Bâtiment requested on March 17 a 10-day stop to construction in the country to allow the industry to sort out confusing safety mandates for workers, who also face PPE shortages. The group represents more than 50,000 businesses in France employing two-thirds of the sector’s 1.1 million workers.
Media report "police interventions" at some construction sites.
In a March 18 letter, association President Jacques Chanut called for support of the construction sector, noting the current "serious, rare crisis of unprecedented magnitude."
With a 15-day construction suspension under way, which is set to be extended, French firms with inventories of face masks, were donating them to health care providers, including a supply of 1 million masks provided by Bouygues.
Decision Time for UK Shutdowns
Confusion in the UK over project closures was widened after Robert, Jenrick, Secretary of State for Housing, Communities and Local Government, weeted issued this tweet: “If you are working on site, you can continue to do so. But follow [public health guidance.]"
Responding, Graham Watts, CEO of the UK industry umbrella group Constructio Industry Council, noted in a response tweet "a lack of clarity which urgently needs to be resolved.”
Scotland First Minister Nicola Sturgeon was clear in calling for all jobsites to close.
In a bid to ensure industry operations, the Construction Leadership Council rushed out its safety advisory: Site Operating Procedures
“We are in exceptional circumstances, and are doing our utmost to keep construction sites operational wherever it is practical and safe to do so,” noted Andy Mitchell, council co-chair and CEO of the Thames Tideway super sewer project.
But deciding that safe distancing restrictions would be impossible to achieve on site, some industry owners have started closing down operations.
The most high profile is the multibillion dollar London Crossrail program, which is already running late. London’s Transport Commissioner Mike Brown halted work on the rail project except what is related to operational safety. “As we work through these issues with our supply chain, consideration will be given to the impact on workers, particularly those who are on low incomes,” he noted.
Mark Wild, CEO of Crossrail Ltd. added: “We are doing everything we can to support our principal contractors during this difficult and challenging time."
At the same time, individual contractors started winding down site work. Among them is major housebuilder Taylor Wimpey plc. which has ordered all sites to close. Facing “months of uncertainty”, the company also suspended dividend payments to shareholders totalling $520 million due by this July.
The financial blow to contractors such as Taylor Wimpey should be softened by government actions, according to the trade group Build UK. “We know that large and small public sector clients are looking at … how they can work with their supply chains to keep payments on track,” it notes.
A day before Johnson’s announcement, the government instructed all public procurement entities to continue paying, and promptly, their contractors, even if they fail to meet performance goals because of Covid-19 disruption. “The public sector must act quickly and take immediate steps to pay all suppliers as a matter of urgency to support their survival over the coming months,” explained the guidance, in effect until at least June 30.
It directs all public procurement offices to urgently review their contract portfolios and inform potentially at risk suppliers that they will continue to be paid even if work is disrupted or suspended.
Owners should introduce a range of measures, such as advance payments, says the guidance, noting that where payments would normally be based on performance, owners could, for example, they would be assessed based on three previous months’ output.
The government directive also notes that rather than allow normal contractual claims to suspend a contract, such as related to force majeure, public owners should instead negotiate variations to soften terms of their contracts.
The new guidance urges owners to be pragmatic when dealing with contractors whose operations are interrupted by the virus outbreak but also advises them not to accept claims from suppliers that were struggling with contracts before the pandemic. .
The new directive follows a March 17 appeal to Johnson by CLC, co-signed by chiefs of three other major industry groups, to not shut down construction sites.
"If construction activity comes to halt, given the scale of employment provided by our sector, there would be an immediate need for the government to provide emergency financing to keep the construction industry operational and prevent irreversible damage to the economic security of millions of people, said Miller. "it is critical that our supply chain is able to stay in place and keep working as long as is possible – and that will in turn maintain readiness and help to drive recovery efforts.”
Following strict new COVID-19 prevention rules, Austria’s largest contractor Strabag SE closed all of its roughly 1,000 national sites last week for “several weeks,” saying the company cannot guarantee it can maintain the newly required 1-m space between workers or rely on its supply chain under current conditions.
Strabag cannot forecast when closures might follow at its foreign sites.
Tough rules governing people movements “are having an enormous impact on our construction operations … we feel compelled to take this drastic step,” said CEO Thomas Birtel. Some projects where spacing rules can be met or are of “overriding public” interest will continue to function to some extent with owners’ consents.
Strabag will issue termination notices to its blue and while collar workers in Austria under the national labor law.
The contractor in 2018 employed over 11,000 people in its home country, which generated $2.7 billion of sales accounting for 16% of the group total. The contractor is more exposed to conditions in neighboring Germany, where its workforce of nearly 30,000 generated close to $9 billion in sales in 2018.
German construction appears to be little affected by the pandemic at the moment with the country’s largest contractor reporting no serious problem other than subcontractor and supplier delays. “Operations on our sites continue without major disruption due to the coronavirus,” says a spokesman for Hochtief A.G.
Based on new government guidelines in Belgium, Dutch contracting giant Royal BAM Group closed its 100 project sites in the country as of March 18, noting “contingency plans ... and necessary measures to preserve the interests of BAM and its clients,” which were not detailed.
The firm said it would register ”the majority” of its 1,200 site employees for temporary unemployment to gain government benefits.
Swiss construction sites have been closed by authorities in the Geneva region and elswhere to a lesser extent, because subcontractors are no longer working or cross-border workers cannot travel in.
Sweden and Norway sources report that activity on construction sites is continuing as normal until further notice.
The European Bank for Reconstruction and Development said on March 18 that despite the current project impacts and market uncertainties from the COVID-19 pandemic, economic recovery from its negative effects could be robust. It annunced launch of a $1.1-billion "emergency solidarity package" to support companies in the countries it serves.
Bank economists report that the rebound could be swift and significant within the 38 emerging economies in which it invests on three continents, with more detailed economic forecasts set for release at the end of March.