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.

Optimism for construction workloads in the UK

There is optimism for construction workloads in the UK, despite uncertainties around Brexit weighing on investment decisions, and various market constraints, according to the results of the Q4 2017 RICS Construction and Infrastructure Market Survey.

Survey highlights:

  • Only 12% of respondents expressed any confidence in Government strategy succeeding to hit housing target
  • Brexit uncertainties continue to weigh on investment decisions
  • Outlook for workloads and employment growth improves amid ongoing capacity constraints

View and download the survey

Workloads rise

In Q4 2017, 21% more chartered surveyors reported their workloads to have risen despite financial constraints, labour shortages and planning delays remaining key impediments to growth with 80%, 60% and 60% of surveyors reporting difficulties with each, respectively. Comments from some respondents suggest that stricter conditions being placed on firms by financial institutions are limiting growth, which most likely reflects increased caution given cyclical market conditions and Brexit considerations.

The lack of sufficiently skilled workers also remains an obstacle for many businesses, particularly with regard to professional services such as quantity surveying – only in 2007 had the share of contributors highlighting this as a concern been higher.

Also measured in the Q4 2017 survey was an assessment of how contributors feel about the wide range of policies included in the Autumn Budget and Housing White Paper to lift housing delivery to 300,000 units per year. Nationally, only 12% of respondents expressed any confidence in the overall strategy succeeding while the remainder were evenly divided between a lack of confidence or being unsure.

Policies

Looking at specific policies, a £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes, was viewed by far as the most effective to boost housebuilding (37%). This was followed by lifting Housing Revenue Account borrowing caps for councils in high demand areas (18%) and adding £2.7bn to the Housing Infrastructure Fund (16%).

Despite the constraints that firms have been facing recently, chartered surveyors remain optimistic about the outlook for the year ahead. The RICS survey is forward looking in comparison to official data, and net balances of 48% and 35% of respondents expect workloads and employment levels, respectively, to continue to rise over the coming 12 months.

Pace of growth

Workloads are now reported to be increasing across all geographic regions, particularly in the Midlands and North. Over the past year or two, however, the pace of growth in the infrastructure sector has slowed noticeably in Scotland with surveyors now reporting the first decrease in activity since Q3 2016. This has been somewhat offset by an improvement in workloads in Northern Ireland.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of +12% of respondents expecting a rise in margins over the coming year, unchanged from the previous quarter. This is likely to have impacted tender pricing as well, with 56% more respondents in both the building and civil engineering areas envisaging greater price pressures.

Jeffrey Matsu, RICS Senior Economist said “Activity in the construction and infrastructure sectors continues to expand despite uncertainties related to Brexit and recent market events. While expectations for the year ahead remain positive, surveyors express very limited faith in the government’s national strategy to deliver on its revised housing delivery target. Capacity constraints notwithstanding, the ability of the sector to contribute more sustainably to economic prosperity will depend largely on more coherent policies addressing issues ranging from workforce development to local planning and permissioning.”

Lewis Johnston, RICS Parliamentary Affairs Manager added “with only 12% of respondents confident that the Government’s overall housing strategy is sufficient to meet housebuilding targets, it’s clear more radical action is needed. As we said at the time of the Autumn Budget, the smorgasbord of policies set out by the Chancellor did not amount to the fundamental step-change we need to really shift the dial on housing.

“In practical terms, the Government should go further with the policies respondents felt will be most effective, such as the £1.1 billion fund to unlock strategic sites. In addition to the partial lifting of the Housing Revenue Account borrowing cap, councils should also be given the tools they need to build, including more access to funding and a pipeline of suitable land. The fact that 60% of survey respondents cited labour shortages as a serious constraint to growth underlines to need to tackle skills shortages in construction, and move the sector towards higher-tech, less labour intensive production methods.”

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MP’s vote to leave Parliament for £5.6bn refurbishment

MPs have voted to vacate the Palace of Westminster while a proposed multi-billion pound modernisation of the historic building ensues.

The Commons approved a motion calling for a “full and timely decant”, designed to allow essential repairs, by 236 votes to 220.

The move, part of a proposed £5.6bn refurbishment, is not expected to take effect until 2025 at the earliest.

A brief history

Completed in the 1860s, the Palace of Westminster is an iconic building that currently houses the British Parliament. It is a world famous and instantly recognisable structure and stands as a celebrated international symbol of our parliamentary democracy. Just as UK Parliament is constantly in a state of flux, so too has the building; adapting accordingly to suit its primary and functional purpose. Taking massive damage during the WWII blitz, the Houses of Parliament were repaired as a matter of utmost national priority post-1945. The project was seen as a real opportunity to create some much-needed new facilities that would be consistent with the original design.

From the 1960s onwards the requirement for individual Members of Parliament to have offices, coupled with the expansion of other parliamentary services led to the acquisition of additional buildings and the Palace became the core of a much larger Parliamentary Estate. In 1992 responsibility for maintaining the Palace ‘on behalf of the nation’ transferred from the Government to Parliament itself. How did this work out?

Fighting a losing battle

It appears that since 1992, every effort has been made to maintain what is ultimately an outdated and increasingly unsuitable infrastructure. Services such as heating, cooling, water, sewage, electricity and cabling have been kept semi-functioning, but have not been modernised. Astoundingly, there has been no real general renovation of the building and its services since the partial rebuild of 1945-50 – some of the services even predate the war. The original basements and vertical shafts that litter the building are now completely filled with pipes and cables, making further work difficult to carry out – which results in further expense.

Reports illustrate that asbestos features heavily throughout the palace and although asbestos remains safe if treated with great care in compliance with safety regulations, it makes any intervention so much more difficult. Another issue is that most of the work undertaken over the last 50 years is largely undocumented and since many areas are inaccessible, the state of dilapidation and subsequent risk is mostly uncharted. The building is completely at the mercy of fire, with little modern safety practices in place and fire compartmentation considered almost impossible.

The original roofs are no longer watertight and there are many areas plagued with penetrating damp, damaged by interior leaks and flooding.

      Read more: Radical concept for temporary floating parliament unveiled

Today, an influential committee is expected to recommend that MPs and peers should abandon the crumbling Houses of Parliament for six years so that drastic refit works can be carried out.

The cost

So now at the crux of the issue, how much does it cost to renovate a 150 year old Grade I listed building which is partly sinking, contains asbestos and has outdated cabling? The short answer is ‘a lot.’ The sheer amount of work and the sensitive nature of refurbishing a World Heritage Site results in a sky-high estimate of £5.6bn, with some suggesting the sum could rise to as much as £7.1bn.

A 2012 report warned that “major, irreversible damage” may be done to the building unless significant restoration work is carried out soon, making the refurbishment one of the most urgent and arguably important renovation projects in the UK today. Some feel that the whole thing is a needless expense to the taxpayer and a vanity project for British Parliament. Another previous report concluded that the maintenance costs alone are so astronomically high that if the Palace of Westminster was a commercial structure of no historical significance, it would be far more cost-effective and efficient to demolish it and rebuild using modern methods of construction, such as modular offsite building.

Whatever you stance, the Houses of Parliament are of national, historical and cultural importance and refurbishment will happen.

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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.

Modular_Construction_vs_Traditional_Construction_v2-min

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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