Building News is an information portal for all professional building specifiers. Here you can find all of the latest construction news from around the UK and the rest of the world.

Carillion projects worth a total of £5.7 billion

As the economy continues to come to terms with the collapse of Carillion, the latest figures suggest that on the day of liquidation, the industry giant was the main contractor on 57 construction projects worth a total of £5.7 billion, including a £1.3 billion HS2 contract.

This latest information comes from construction industry analysts Barbour ABI, who outlined that ten of the 57 projects were each individually worth more than £150 million, such as the Royal Liverpool hospital and an Army basing programme in Salisbury worth £450 million and £340 million respectively.

Carillion projects worth a total of £5.7 billion carillion live projects

Carillion were also involved in 16 framework contracts as part of a list of companies pre-selected or pre-qualified to undertake works for an organisation. These framework contracts are not included as part of the final 57 projects as there is no guarantee that they had won any work from the framework.

Commenting on these findings, Michael Dall, Lead Economist at Barbour ABI, said “Carillion were deeply embedded within the construction industry – they were the second biggest contractor in the UK by revenue. Our records show that they were the main contractor on almost 60 schemes worth a total value of £5.7 billion. That is not to mention the plethora of other contracts where they were carrying out other construction roles.”

      Read more: Carillion to be investigated for pension fraud

“The sector where Carillion had the largest presence was infrastructure – road and rail projects were a particular speciality for the firm. In addition, Carillion were in the process of delivering two new hospitals and were also responsible for various school improvement projects. What happens to these projects is a matter for conjecture. If the reason Carillion went bust was due to under-bidding then it stands to reason that the financial terms will have to be renegotiated. There is no doubt this will happen but will it happen quickly enough to save the many firms in the Carillion supply chain?”

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Carillion to be investigated for pension fraud

Following questioning by The Work and Pensions Committee regarding the way pension investments were managed at collapsed construction giant Carillion, The Financial Reporting Council (FRC) has decided to open an investigation under the Audit Enforcement Procedure in relation to KPMG’s audit of their financial statements, covering the years ended 31 December 2014, 2015 and 2016 – with additional audit work of 2017 to follow.

The investigation will be conducted by the FRC’s Enforcement Division, and will consider whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors. Several areas of KPMG’s work will be examined including the audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions.

The FRC have stated that they will “conduct the investigation as quickly and thoroughly as possible.”

They have also confirmed that they are progressing with urgent enquiries into the conduct of professional accountants within Carillion in connection with the preparation of the financial statements and other financial reporting obligations under the Accountancy Scheme, liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion.

Frank Field, chairman of the Work and Pensions Committee said “It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years.”

More to follow.
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Modular Vs. Traditional Construction

The traditional method of construction has for a long time, been the accepted norm.

A graduated approach, the process of building using the traditional method is steady progress. Foundations are laid, walls are built, roofs are added. And then the interior of the building is created. And finally, before being handed over to the customer, the snag list is completed – all those small issues and tasks that need altering.

And only then is the building complete.

Modular Building – The New Construction Method

Modular building changes everything about construction from halving the time it takes to construct a building, to changing attitudes.

Modular building techniques save time and money. As the foundations for a new building are laid, construction on the building itself, in a factory setting with skilled craftspeople, has already begun. This tandem working halves the time it takes to finish a building.

Before the building is delivered to site, the snag list is completed at the factory. Literally, the building in transported, fixed in place and the keys handed over.

Who Benefits?

Everyone. And the environment does too, with less waste and increase in the use of sustainable materials.

The pace of the turnaround means the customer has the extension or extra buildings they need quickly, but without compromising on quality. In terms of budget, there are no dead spots in the process either. No weeks on end without being able to use your buildings, while materials are waited for and so on.

Domestic and commercial customers are realising the benefits of modular construction. For some clients, the solutions on offer can’t come quick enough. For the medical industry, for example, modular construction means more room, and fast. It also means investing in additional space that can house specialised equipment and process too, without a hefty price tag.

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Courtesy of www.mtxcontracts.co.uk.

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Two-thirds of construction bosses can’t find a bricky or chippy

Two-thirds of those running small and medium-sized (SME) construction firms are struggling to hire bricklayers and carpenters as construction skills shortages hit a ‘record high’, according to the Federation of Master Builders (FMB).

Key results from the FMB’s latest State of Trade Survey, which is the only quarterly assessment of the UK-wide SME construction sector, include:

  • More than two-thirds (68%) of construction SMEs are struggling to hire bricklayers and 63% are struggling to hire carpenters and joiners – the highest figures since records began in 2008;
  • The number of firms reporting difficulties hiring plumbers and electricians (48%), plasterers (46%) and floorers (30%) also reached record highs;
  • Construction SME workloads grew at a slightly slower rate than in Q3 2017, but new enquiries and expected workloads slowed more sharply; expected workloads among those firms building new homes showed a negative net balance for the first time since 2013;
  • Fewer construction SMEs predict rising workloads in the coming three months, down from 41% in the previous quarter to 38% in Q4 2017;
  • 87% of builders believe that material prices will rise in the next six months, up from 82% in the previous quarter;
  • Nearly two-thirds (61%) of construction SMEs expect salaries and wages to increase in the next six months.

Brian Berry, Chief Executive of the FMB, said “Skills shortages are sky rocketing and it begs the question, who will build the new homes and infrastructure projects the Government is crying out for. The Government has set itself an ambitious target to build 300,000 homes every year in England alone. More than two-thirds of construction SMEs are struggling to hire bricklayers which is one of the key trades in the building industry. This has increased by nearly 10% in just three months which points to a rapid worsening of an already dire situation. What’s more, nearly as many are facing difficulties hiring carpenters and joiners. These figures are the highest we’ve noted since records began a decade ago. As a result, the wages for these increasingly scarce skilled tradespeople continue to rise sharply; that’s a simple consequence of supply and demand. This, coupled with the fact that small construction firms continue to face significant material price increases, will inevitably squeeze their margins and put a brake on growth.”

“The Government must take account of the worsening construction skills shortage with Brexit looming large on the horizon. The Prime Minister must ensure that the immigration system that replaces the free movement of people can take account of the particular needs of key sectors such as construction and house building. Without skilled labour from the EU, the skills shortages we face would be considerably worse, and it is not in anyone’s best interest to pull the rug out from under the sector by introducing an inflexible and unresponsive immigration system. On the domestic front and in the longer term, to ensure we have an ample supply of skilled workers in the future, the Government must continue to work with industry to set the right framework in terms of T-Levels and apprenticeships.”

“The silver lining to current skills shortages among construction SMEs is that the numerous tradespeople and professionals, who may find themselves out of work following the collapse of Carillion, have a ready supply of alternative employers. The FMB is working with the Department for Work and Pensions and the Construction Industry Training Board to match-make ex-Carillion workers with small construction employers in need of skilled workers. We’re also working hard as an industry to re-home the 1,200 Carillion apprentices who are the innocent victims of the major contractor’s demise. It’s in everyone’s interests to ensure that these young people continue on their path to a rewarding career in construction.”

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Independent review to tackle barriers to building

A vital independent review into understanding why hundreds of thousands of homes haven’t been built – despite having planning permission – is now underway, according to the Government.

Originally announced at Autumn Budget, the review, led by Sir Oliver Letwin will look to explain the gap between the number of planning permissions being granted against those built in areas of high demand.

Currently, after planning permission is granted a variety of factors can prevent development from starting and slow down delivery and the review wants to determine why.

As of July 2016, just over half the 684,000 homes with planning permission had been completed.

The review will seek to identify the main causes of the gap and will make recommendations on practical steps to increase the speed of build out. Latest evidence shows that residential planning applications are up and that time to process major applications continues to be at a record high.

Sir Oliver Letwin, Chairman of the Review Panel, said “This government is serious about finding ways to increase the speed of build out as well as tackling the complicated issues surrounding it.

“That’s why we have set up this diverse panel to help me test my analysis and to make practical, non-partisan recommendations, as we look to increase housing supply that’s consistent with a stable UK housing market.”

Housing Secretary Sajid Javid said “We are determined to build the homes this country needs, but currently there is still a significant gap between the number of planning permissions being granted and the number of homes built.

“This review is vital to helping us understand how we can build more homes quickly.

“All parties have a role to play in closing the gap and I look forward to receiving Sir Oliver’s findings.”

The review will be conducted in 2 phases:

Phase 1 – currently under way – will seek to identify the main causes of the gap by reviewing large housing sites where planning permission has already been granted. This will include information-gathering sessions with local authorities, developers, non-government organisations and others. Early findings will be published in the interim report.

Phase 2 will make recommendations on practical steps to increase the speed of build out, which will be published in the full report.

The review will also consider how to avoid interventions which might discourage house building or hinder the regeneration of complex sites.

Sir Oliver will be assisted by a team of leading experts:

  • Richard Ehrman – author, small commercial property developer and former journalist. Former special adviser to the Secretary of State for Employment and subsequently Northern Ireland, onetime Chief Leader Writer of the Daily Telegraph, and former Deputy Chairman of Policy Exchange
  • Lord Jitesh Gadhia – Member of House of Lords and investment banker
  • Lord John Hutton – (Labour) Peer and former Secretary of State
  • Rt Hon Baroness Usha Prashar CBE, PC – (Crossbench) Peer with a career spanning public, not for profit and private sectors, currently Deputy Chairman, British Council and a non-
  • Executive Director of Nationwide Building Society
  • Christine Whitehead – Emeritus Professor of Housing Economics at London School of Economics
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Construction giant Carillion goes into liquidation

Construction behemoth Carillion have given the shock announcement that they are to go into liquidation, putting thousands of jobs at risk.

Little is known about the details as yet, but according to the statement talks between the firm, lenders and government failed to reach an adequate solution for saving the second biggest construction company in the UK.

The company employs a total of 43,000 people around the world – 20,000 of which are located in the UK. It is not yet clear how these people will be affected, however, government have stated that they will continue to provide funding in order to maintain public services currently run by Carillion.

News of the liquidation will undoubtedly come as a shock to construction professionals, who in recent years have seen the firm involved in major projects such as HS2 and the delivery of schools and prisons. They are also the second biggest supplier of maintenance services to Network Rail, and they maintain 50,000 homes for the Ministry of Defence.

Where did it all go wrong?

In a BBC article, Carillion chairman Philip Green said “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.

“In recent days, however, we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.”

Bernard Jenkin, the Conservative chairman of the House of Commons Public Administration Committee, added “This really shakes public confidence in the ability of the private sector to deliver public services and infrastructure.”

“There needs to be a change in the mindset of many of many of these companies… if you’re actually doing a very substantial amount of business at taxpayers expense for the taxpayer, you’ve got to treat yourself much more as a brand of the public service not as a private company just there to enrich the shareholders and the directors.”

“Ironically, Whitehall tends to do contracts with companies that it always does contracts with, because that’s the safe thing to do – that’s the perception. A great many small and medium-sized companies feel excluded.”

Mick Cash, the general secretary of the Rail, Maritime and Transport (RMT) union, concluded “This is disastrous news for the workforce and disastrous news for transport and public services in Britain.

“RMT will be demanding urgent meetings with Network Rail and the train companies today with the objective of protecting our members jobs and pensions.

“The infrastructure and support works must be immediately taken in house with the workforce protected.”

According to BBC business editor Simon Jack, some of Carillion’s contracts will now be taken on by other firms whilst others could be renationalised once again.

 

More to follow.

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Industry express concern in response to ‘Preparing for Brexit’ report

Construction experts RICS have expressed concern for some time about the impact of Brexit on construction, particularly as positions harden.

Construction and Infrastructure market surveys continue to illustrate the ongoing skills shortage. However, the ‘Preparing for Brexit’  report released this week underlines the potential wider impact on productivity and investment in a post-EU Britain.

EU worker shortage

The ‘Preparing for Brexit’ report warns that losing access to EU workers in the construction sector could make it harder to achieve infrastructure ambitions, also reducing firms capacity to hit Government housing targets amid the continuing housing shortage regularly illustrated in the RICS UK housing market survey.

It is easy to see how London would be disproportionately affected in terms of construction and skills, and both for the capital and beyond it is an absolute necessity that construction workers and built environment professionals, such as quantity surveyors, are added to the UK occupation shortage list.

Wider implications

Looking at the wider implications in the analysis released this week, the impact on supply chains and the flow of construction materials and goods could confound this picture as around two-thirds of both export and imports of building materials are with the EU. Moreover, losing access to access to EU funding streams – including potentially the European Investment Bank (EIB) – and the dampening of demand from foreign investors due to uncertainty would be a further threat.

The UK Government must act promptly to keep EIB funding or introduce a new lender, or lending mechanism, to plug the gap created from the potential loss of EIB funds, particularly for shovel ready projects that are of great importance to the capital.

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What’s in store for tradespeople in 2018

This year a range of regulatory updates and government-led initiatives are expected to have an impact on the construction industry, potentially affecting thousands of tradespeople across the UK.

2018 could be instrumental in terms of making – or preparing to make – significant changes for trade professionals and the services they deliver. To help, IronmongeryDirect has produced an overview bringing together these key changes.

Independent Review of Building Regulations and Fire Safety

Following the tragedy of the Grenfell Tower fire in June 2017, the government launched an independent review into building regulations and fire safety. Led by Dame Judith Hackitt the review is examining the regulatory system around the design, construction and ongoing management of buildings in relation to fire safety and related compliance, as well as enforcement issues and international regulation and experience in this area.

An interim report was published in December 2017 which stated that the current regulatory system for ensuring fire safety in high-rise and complex buildings has been deemed “not fit for purpose”.

Speaking about the report, Dame Judith said: “There is plenty of good practice, but it is not difficult to see how those who are inclined to take shortcuts can do so. Change control and quality assurance are poor throughout the process. What is initially designed is not what is being built, and quality assurance of materials and people is seriously lacking.”

Tradespeople are advised to familiarise themselves with the findings when the full report is published in spring 2018, since it could bring about changes to working practices.

Additional Funding for New Homes

The autumn budget provided positive news for the construction sector which should start to filter though during 2018.

£15.3 billion of additional funds have been made available to facilitate the construction of 300,000 new homes a year over the next five years. In addition, the skills shortage in the construction sector has been addressed with the Chancellor setting aside £204 million to train younger trade professionals.

The government will also be introducing the new technical vocational qualifications – or ‘T Levels’ – and increasing the hours of training for technical students aged 16-19 by more than 50%.

Wiring Regs

Mainly affecting electrical professionals, but still very important for construction projects are the changes to the Wiring Regulations, due to be announced in July 2018.

Co-published by the Institution of Engineering and Technology (IET) and the British Standards Institution (BSI), the 18th Edition updates are likely to be wide-ranging and will affect the whole electro-technical industry. From 1st January 2019, it will be a requirement that all electrical installations designed after this date comply to the updated regulations.

It is important for tradespeople working in this field to at least be aware of these changes.

Consultation on Cash Retention

With a shift in focus to small business management, the current consultation launched by the Department for Business, Energy and Industrial Strategy is addressing the practice of cash retention under construction contracts.

According to a recent survey, one in three businesses (32%) said that between 3 and 10% of their turnover was being held in retentions.

The results of the consultation will not be released until later in 2018 but it is hoped that they will lead to changes that will result in prompt and fair payment for firms working in the construction sector, particularly small and start-up businesses.

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UK can be a world leader in digital transformation of infrastructure

Government and industry should build upon its pioneering work in digital engineering to improve the performance of UK infrastructure and unlock growth across the country, according to a report from the Institution of Civil Engineers (ICE).

Digital Transformation calls on Industry and Government to use the Modern Industrial Strategy to drive the uptake of digital technology and data in infrastructure design and delivery. This transformation could drive up productivity and unleash the full potential of the UK’s economy, while also creating a world leading industry.

According to the report, the UK cannot build its way out of pressures from population growth and climate change. Digital transformation would enable the UK to do more with existing assets and networks.

This includes the workforce, with the report calling for both industry and the Government to place greater emphasis on upskilling and reskilling mid-career professionals in addition to existing initiatives that target young people.

The report’s key recommendations include:

  • The £23billion National Productivity Investment Fund should prioritise digital transformation of both construction methods and physical infrastructure which increases capacity and performance of existing assets and networks
  • The Department of Business, Energy and Industrial Strategy should put digital transformation at the heart of the Infrastructure Pillar of the Modern Industrial Strategy, realising the UK’s potential as a world-leader in this sector
  • Industry and Government must ensure that people at all points in their career have the right skills to adapt to advances in technology and information management. Major infrastructure projects should be used as incubators for skills and innovation

Dr Anne Kemp, Chair of the ICE State of the Nation Steering Group, said “The Government rightly recognises the link between improved connectivity and balanced national productivity. Our decision-making must put the user at the centre, delivering new infrastructure that enables people to get to work and enjoy their leisure time. However, much of our current infrastructure will still be here in 30 years’ time, so we must use technology to do things smarter and make more of what we already have. We must be more imaginative in what we mean by digital transformation and what it can achieve.

“Similarly, we cannot afford to wait for the next generation to arrive with the right skills. The current adult skills agenda must go beyond basic digital literacy initiatives but instead look at better training for our existing workforce.”

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Construction output increases at fastest pace in 11 months

UK construction companies signalled a positive end to the year – led by the fastest rise in new order volumes since January 2016, according to the latest Markit/CIPS UK report. Stronger demand patterns resulted in sustained job creation and a broad-based upturn in business activity during December. However, the construction sector continued to experience intense cost pressures as suppliers passed on higher imported raw material prices. The latest rise in overall input costs was the steepest for just over five-and-a-half years.

At 54.2 in December, up from 52.8 in November, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI® ) signalled a robust and accelerated expansion of overall construction output. The headline index has now posted above the 50.0 no-change mark for four months running, and the latest reading signalled the fastest pace of expansion since March 2016. Anecdotal evidence suggested that improving order books and a general rebound in business conditions had helped to lift construction output in December.

Construction

Residential building activity remained the best performing sub-category at the end of 2016. Moreover, the latest expansion of housing activity was the fastest since January. Work on civil engineering projects also picked up at a robust pace in December, while commercial construction increased only marginally.

New business volumes expanded at the strongest rate for 11 months in December, which marked a sustained recovery from the soft patch seen in mid2016. Reports from survey respondents cited rising client demand and a resilient economic backdrop. Greater workloads encouraged a further solid increase in staff recruitment across the construction sector. The latest rise in employment was the fastest since May, but still much weaker than seen on average since the jobs rebound began in mid-2013.

December data indicated that exchange rate depreciation continued to drive up input prices across the UK construction sector. The latest Page 2 of 4 © IHS Markit 2017 increase in average cost burdens was the fastest since April 2011. At the same time, supplier leadtimes continued to lengthen, with the latest survey pointing to the most marked deterioration in vendor performance since June 2015. Some construction firms noted that forward purchasing had resulted in low stocks among suppliers.

Meanwhile, construction companies reported a reasonably upbeat assessment for their growth prospects in 2017. Around half of the survey panel (48%) anticipate a rise in business activity during the next 12 months, while only 13% forecast a reduction. The degree of business confidence edged up to a three-month high during December, with a number of construction firms citing optimism that strong order books would help alleviate Brexit-related turbulence in 2017.

Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI® said “December’s survey data confirmed a solid rebound in UK construction output during the final quarter of 2016. All three main areas of construction activity have started to recover from last summer’s soft patch, but in each case growth remains much weaker than the cyclical peaks seen in 2014.

“Housebuilding remains a key engine of growth for the construction sector, with the latest upturn the fastest for almost one year. Meanwhile, commercial activity was the weakest performing category in December, reflecting an ongoing drag from subdued investment spending and heightened economic uncertainty. “The main negative development in December was a sustained acceleration in input cost inflation to its strongest since 2011. UK construction companies noted that the weaker sterling exchange rate had resulted in higher costs for a wide range of imported materials, while some also reported that forward purchasing of inputs had led to depleted stocks among suppliers.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, added “The residential sector raced ahead this month, with the fastest pace of growth since January 2016. Strong pipelines of new work were reported across all sub-sectors, and construction firms showed improved confidence after the impacts of uncertainty around the EU referendum.

“Prices continued on their upward inflationary trajectory, at the strongest rate for five and a half years. In response, firms have increased their stock buying to not only fulfil new orders, but also to counteract anticipated price increases throughout the year, as inflationary pressures are set to continue and the weakness of the pound persists. Stock levels at suppliers were also under pressure, as vendor performance deteriorated to the greatest extent since June 2015.

“With these more resilient economic conditions, the sector also reported the fastest pace of job creation since May 2016, as companies developed their workforces to meet new projects. “In the short-term at least, the sector looks set to enjoy these improved demand conditions for the coming months, which is positive news after many months of instability.”

Construction

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