The impact of COVID-19 on the financial performance of the UK construction firms

Abstract

The COVID-19 outbreak was deemed a pandemic by the World Health Organization (WHO), and the associated travel restrictions led to an unprecedented fall in the UK economic growth including the construction sector. Nevertheless, few quantitative studies assessing the impact of COVID-19 on the UK construction sector have been conducted as of now. So, this research aims to quantitatively assess the COVID-19 pandemic’s effects and causally evaluate its influence on the UK construction industry. We utilize panel data comprising financial information from listed UK construction firms spanning from 2015 to 2021. The findings reveal a substantial adverse impact of COVID-19 on business performance, with a notable improvement in performance in 2021 compared to 2020. It also proves that the supply chain disruption, labour shortage, and financial dilemma are the main reasons for the negative effect of COVID-19 in 2020 and 2021, and increased vaccination rate, domestic policy changes, and potential for construction development are the possible reasons for the 2021 recovery. Despite the gradual easing of the epidemic situation, the construction industry must enhance its resilience to sudden disasters to effectively facilitate a robust economic recovery. It is essential to further examine the economic fluctuations caused by the pandemic emergency and the mechanisms for its recovery.