Multimillion-pound restoration

New Warehouse roof and Gantry (Image credit: The Board of Trustees of the Science Museum)

Work has begun on a grade II-listed building at Manchester’s Science and Industry Museum, replacing a historic roof the size of two Olympic swimming pools.

The New Warehouse, which is more than 140 years old, is the next building to undergo essential conservation work.

It is part of a multimillion-pound restoration programme taking place across the Science and Industry Museum’s site.

Scaffolding will be erected around the New Warehouse this winter as part of the museum’s current £14.2m worth of national capital funding by the Department of Culture, Media and Sport (DCMS) to complete urgent repairs.

Originally built in the 1880s to support the expansion of Liverpool Road Station, the building provided essential goods storage as the station grew into a hub of 19th century industry.

Now it houses the main museum entrance, three permanent galleries (Revolution Manchester, Textiles Gallery and Experiment), three changing exhibition spaces, a café, shop and conference space, spread across three floors.

Manchester-based architects Buttress, who specialise in restoring listed and historic buildings, will work on the scheme.

Sally MacDonald, director of the Science and Industry Museum said: “We are delighted that the next stage of the site’s multi-million-pound restoration project is underway. This marks an exciting moment as we carry out vital repairs to our main museum building, including a brand-new roof.

“Whilst this repair work will bring some disruption to our site, including our largest scaffolding structure to date, the changes taking place now will mean visitors can enjoy our museum for years to come. We’ve always been a place of change and transformation and the work on New Warehouse is our next step to future-proof our historic site.”

 

source: Insider Media

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Lift Barriers to MMC and Deliver Affordable Housing

The only way that new ‘green’, efficient, safe housing can be built in the UK at the speed and scale required is if modern methods of construction (MMC) are more widely adopted in the housebuilding market, but the industry needs help to deliver the benefits MMC offer, experts have said.

Iain Gilbey and Graham Robinson of Pinsent Masons said that recommendations published by the House of Lords Built Environment Committee at the end of its parliamentary inquiry into MMC – a concept that covers a range of alternative off-site and on-site techniques – shine a light on issues that present a significant barrier to a thriving MMC industry.

Gilbey said:

“The UK government has a target of building 300,000 new homes in England each year, but the chronic skills and labour shortage and stagnant productivity that plagues the construction sector present a significant barrier to traditional housebuilding. A shift to off-site factory manufacturing of standardised building components, among other modern methods of construction, can not only help housebuilders realise huge improvements in productivity – it can also cut both embodied carbon and the amount of waste created by the construction industry and over time will lead to net zero homes.”

“However, as the Built Environment Committee has exposed, the MMC industry has faced problems in the UK, with a number of specialist providers of volumetric housing having gone out of business in recent years. For the benefits of MMC to be realised, the industry needs a long and stable pipeline of projects to make adopting MMC commercially viable – the level of investment needed to establish new factories and overhaul traditional construction business models is significant. The committee has highlighted reasons why this pipeline of work has not emerged in the way it might,” he said.

In a letter to housing secretary Michael Gove (18-page / 347KB PDF), chair of the Built Environment Committee, Lord Moylan, said the committee has “limited confidence that a coherent plan to encourage the use of MMC is in place”.

The committee highlighted the link between potential growth in the use of MMC and the government having “a clear strategy and a good understanding of how the industry operates” and called on the government to “publish its full strategy for MMC now or, if it requires updating, by no later than the end of March 2024”.

Currently, the government provides direct loans to some MMC companies and supports the adoption of MMC through the Affordable Homes Programme (AHP). The committee said, though, that the government should assess whether those measures are “the most effective way to support the establishment of new MMC companies and their research and development”.

The committee also identified a disconnect between the benefits MMC have to offer and the demand specialist MMC manufacturers are seeing for their services. It said the government should “undertake further research … to determine if there are genuine policy barriers to major housebuilders increasing their use of MMC”.

Among the other issues it raised, the committee said the government should update documents that support the housebuilding industry to assess its compliance with building safety regulations to make it easier for the industry to assess how MMC map to the regulatory requirements. It said the government also must do more to ensure insurers provide the warranties developers need when using MMC.

Pinsent Masons has consulted with over 100 industry leaders across the UK construction and house building industry to examine the practical barriers and potential solutions to adopting modern methods of construction. During this two-year process of collecting the views and evidence gathering, the team of experts at Pinsent Masons has been able to identify the main barriers to MMC and gain a granular view of the practical and legal problems facing the industry.

Together with industry bodies such as the Royal Institution of Chartered Surveyors, Constructing Excellent and Make UK Modular, and individual companies such as TopHat, Pinsent Masons wrote to housing secretary Michael Gove calling on government to do more “to unlock private investment to scale the adoption of modern methods of construction”.

One of the recommendations made in the letter was that stamp duty land tax (SDLT) be reduced for new homes built to an energy performance certificate (EPC) ‘A’ standard. Pinsent Masons has estimated that implementation of the measure would have minimal impact on public finances but bring real benefits by avoiding the need for “expensive retrofits” to millions of new homes that would not otherwise be ‘net zero’ compliant.

Another recommendation was to increase the percentage of new homes built using MMC under the AHP.

Ultimately, according to Robinson, a clear pipeline of projects and incentives are needed to support the industry in investing in a still very nascent approach to building the homes that Britain badly needs.

Robinson said:

“MMC is in all reality the only hope of achieving low carbon and net zero homes, at scale. MMC also allows new materials to be used – and new innovative approaches to be adopted – and has been shown to have the potential to significantly cut embodied carbon in built assets.”

“Creating digital twins and using technology to gather data on how homes are operated can promote long-term improvements to the efficiency of how we use our homes and to the way they are designed, while a platform approach to design also promotes the creation of a circular economy in the construction sector by enabling standardised components to be re-used. In the context of ever-more stringent building safety requirements and growing costs of disputes where defects are identified, developers also stand to see improvements in the quality of building products by moving away from making and installing them in a bespoke way on construction sites to adopting standardised production processes at off-site factories,” he added.

SOURCE: Pinsent Masons

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Government Must Invest £14b in Affordable Homes

 

The British Property Federation has called for 30,000 new build-to-rent homes to be constructed every year.

A group of some of the UK’s biggest construction companies has called on the next government to pour up to an extra £14 billion into affordable homes to ensure 145,000 are built every year.

The British Property Federation (BPF) has called on whoever wins the next election to also ensure that around 30,000 build-to-rent properties are constructed around the country.

Melanie Leech, the group’s chief executive, said:

“This year’s election comes at a critical time. The next government must not only set out a compelling vision for the future but will need to persuade the electorate that it can deliver.”

If the government works with industry it could unlock billions of pounds of investment from property companies, the BPF said as it unveiled its manifesto ahead of the election.

It said that £10 billion of new private capital could be unlocked if the government increased subsidies for affordable housing by £9-£14 billion, adding that this could help deliver 145,000 new affordable homes every year.

“As a country, we need to stimulate economic growth and become more productive,” Ms Leech said.

“We need to invest billions of pounds in our infrastructure, our housing is of insufficient quantity and quality, and town centres across the UK need reinvention.

“Looming over these issues is the existential challenge facing all of us – the need to decarbonise our society.”

The country is going to go to the polls some time this year, or maybe in January 2025, if the Prime Minister holds out until the very latest possible point.

The BPF asked for government action in other areas, including building stronger town centres and trying to help developers erect greener buildings.

It should include more resources for local planning officers, and a central planning system which helps local and regional authorities with massive projects, it added.

The group also asked for reform to the business rates system – the business equivalent of council tax.

A Department for Levelling Up, Housing & Communities spokesperson said:

“We need to build more affordable homes and that is why we continue to invest in our £11.5 billion Affordable Homes Programme, delivering tens of thousands of homes to buy and rent across the country.

“The Secretary of State recently set out new measures to speed up the planning system and we remain on track to deliver one million homes over this Parliament.

“Our long-term plan for housing will allow us to go even further, backed by £10 billion investment to boost supply and build the homes that local communities want and need.”

 

Source: The Standard

 

 

 

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Highlighting the Flood Risks in UK Housing

A recent analysis by Aviva, the UK’s largest home insurer, has unveiled concerning findings regarding the vulnerability of new homes in England to flooding.

The study reveals that 8% of new homes built in the last decade, equivalent to nearly 110,000 properties, are located in flood-prone areas, specifically in national flood zone three—representing the highest risk of flooding.

Despite the staggering numbers, the study shows that many residents of these new homes remain confident in their builders’ efforts to protect against flooding.

Approximately 60% of new home residents believe their home builders or developers have taken sufficient measures. However, only half of them (51%) are aware of specific measures implemented to reduce or prevent flooding.

The research also points out that even though some new homes face a higher risk of flooding, residents seem more aware of measures to enhance their properties’ resilience to climate impacts.

Forty-two percent claim to know what steps to take to improve resilience, and only 26% have not installed any resilient measures. This contrasts with 60% of residents in homes constructed before 2018 who have not taken such measures.

Jason Storah, CEO UK & Ireland General Insurance at Aviva, expressed concern over the situation. Storah noted that many newly-built homes have suffered floods within five years of construction, indicating potential issues with both location choice and construction standards.

The study also emphasises broader concerns about construction practices that could leave homeowners and tenants at risk from various climate events, including extreme weather conditions.

The report highlights that new homes built since 2009 are excluded from the Flood Re reinsurance scheme, designed to enhance the affordability and accessibility of flood insurance in high-risk areas.

Additionally, 59% of residents in homes built in the last five years believe their homes are at risk from flooding, compared to 41% of those in homes constructed before 2018.

Beyond flooding, climate concerns extend to other aspects, with 61% of new home residents expressing worry about the impact of heat on their homes, and 62% concerned about storms.

Despite these concerns, Aviva emphasises the need for collective action to address climate-related risks in construction, advocating for climate-ready housing that can withstand the multiple impacts of climate change.

Storah concluded by underlining the importance of strengthening rules to prevent construction in current and potential flood zones.

For areas where this is challenging, he suggests making flood resilience mandatory in planning rules from the outset to better protect homeowners and tenants from the devastating consequences of extreme weather events.

Source: Reinsurance News

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SIKA PRESENTS CHEQUE FOR £26,366 TO LEUKAEMIA CARE

Sika is delighted to have presented the Leukaemia Care Charity with a cheque for £26,366 at their Preston office this week.

Having raised funds through the annual Sika Cycle Charity Event, Mark Gatrell and Andrea Carbin, of Sika, was on hand to present the cheque on behalf of the company, Leukaemia Care, the UK’s leading leukaemia charity supporting anyone affected by a blood cancer by ensuring that they receive the right information, advice, and support. The event was held in memory of much loved and missed colleague and friend, Rebecca Clarkson, who sadly died with Leukaemia in 2023, and in attendance at the cheque handover were Rebecca’s Mother, Joy Hudson, and Rebecca’s fiancé Rob Woodard.

Rachel Brocklebank, Community and Corporate Fundraising Officer at Leukaemia Care said:

“We are absolutely thrilled to receive this generous donation from Sika and all of the riders at the Sika Cycle 2023, which will help fund support for people who have been diagnosed with a form of blood cancer. There are over 150 different blood cancers, and each year over 34,000 people are diagnosed.  The support we receive from companies like Sika can make a tremendous difference, helping us to support through diagnosis, treatment and beyond.”

Presenting the cheque to Leukaemia Care, Mark said:

“The work that the Leukaemia Care does is vital in supporting those people who are diagnosed.  I would like to say a big thank you to all Sika employees, suppliers and customers, who took part in the cycle charity event last September. Over 130 cyclists took part in a grueling ride and surpassed all expectations with the amount raised for the charity.”

The sponsored Sika Cycle 2023 event on 2nd September saw participants take on one of two challenging routes – lasting 50 and 100 miles – with courses weaving their way through the dramatic landscape of Aviemore in Scotland. The routes gave the riders unrivalled views of the Cairngorms National Park.

The fundraising is vital to the support of the Leukaemia Care Charity, for over 50 years, they have been dedicated to ensuring that everyone affected receives the best possible diagnosis, information, advice, treatment, and support.

 

For more information visit www.sika.co.uk/roofing or www.leukaemiacare.org.uk

 

 

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AUSTRAILIA: Airport Heading to Completion in 2025

The Hon Catherine King MP, Australia’s Minister for Infrastructure, Transport and Regional Development has visited Newcastle Airport for a tour of the terminal expansion construction site. Her visit marked six months since the A$250m (US$165m) redevelopment project began, with several key construction milestones having been met.

The old terminal building has been demolished. On the site of the new terminal, columns to support the new border agency have been installed, work on elevator pits and underground baggage handling tunnels is underway, and a massive concrete slab has been poured. In addition, construction of a new electrical substation is ongoing, which will enable the solar panels on the premium covered car park to be connected later in 2024 and ultimately power up to 30% of the airport’s electricity.

The federal government is contributing A$55m (US$35m) to the terminal expansion project. It has also provided A$66m (US$44m) to develop the airport’s airfield infrastructure.

The Newcastle Airport Terminal Expansion is expected to be completed in early 2025. The redevelopment includes upgrades to the terminal building and runway, a new premium covered parking garage, relocation of the short-stay parking garage and road works on Williamtown Drive. The new terminal building has been designed to achieve a 5-star Green Star rating.

The terminal has been designed by Cox Architecture. Construction Control was awarded the managing contract in April 2023. The project is anticipated to create more than 500 construction jobs throughout its life and will provide long-term benefits for the region. The terminal and runway upgrades are expected to create 4,410 jobs throughout the airport precinct after construction. Over the next 20 years, the upgrade and expansion of the runway and terminal have been projected to strengthen the region with approximately A$12.7bn (US$8.4bn) in economic activity.

Dr Peter Cock, CEO of Newcastle Airport, said,

“The transformative construction project is a critical part of delivering the airport the region deserves. Aviation is a catalyst for our economy’s growth and our region’s transition. Newcastle Airport is committed to growing the airport the region deserves and the airport our region deserves is one that supports industry, enables greater trade, helps create jobs well beyond tourism and is a vibrant part of the Hunter [region].

“The people of our region are passionately behind our airport and connecting the Hunter to the rest of the world. They continue to fly from Newcastle Airport to connect to our 13 direct destinations and on to 65 destinations around the world. We know that the more community support we receive, the closer we get to securing our next international fights. I want to sincerely thank our local member, Meryl Swanson, for her tireless efforts in advocating for our airport, together with our two shareholders Port Stephens Council and City of Newcastle, and finally our banking partner, Commonwealth Bank, for their ongoing support.”

Source: Passenger Terminal Today

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European Building Materials remaining Stubbornly High

The stubbornly high cost of some European building materials despite cheaper energy

It’s been a torrid time for Europe’s building materials producers, as construction projects have stalled significantly in the past couple of years. We think the worst will be over for them soon, but that’s not the whole story. Despite lower energy costs, input prices remain stubbornly high

Building material production levels will bottom out in 2024

We expect 2024 to be a year of transition for the building materials industry comprising of concrete, cement and bricks. In most European countries, production levels tumbled in the past couple of years; volumes are down by almost 15% in Spain and by nearly 25% in Belgium compared with the beginning of 2022. We believe that those volumes will not start to recover until 2025.

Should European interest rates start to come down, as we expect, and we see sustained higher wages, we’re likely to witness a turning point leading to more investments in new premises. However, building projects have a long lead time and the number of issued building permits was still declining in the third quarter of 2023. It will take some time before sales pick up

The beginning of the end of the decline

There are signs indicating that the worst is over. For instance, the confidence indicator for the EU construction sector is still negative but has slowly improved during the last few months of 2023. The confidence indicator for the building material sector has stopped decreasing. In addition, EU house prices rose again and increased in the third and fourth quarters of last year. This allows project developers to increase prices for new-build dwellings. Project plans that weren’t profitable due to higher building costs can now, at least in some cases, be lucrative again.

For example, local Dutch data support this changing trend. Project developers have seen their sales increase since summer 2023 after a period of decline, and sales of new homes are also on the rise again.

Building material industry more volatile than construction sector

The developments in the building material industry are closely related to the construction sector. Yet, this industry is more vulnerable to economic shocks. There are two reasons for this. Firstly, building material companies generally have higher fixed costs as they have invested more in machinery and factories than construction companies. This makes building material companies less agile; therefore, they have more difficulties scaling down during an economic downturn. Secondly, building materials deliver relatively more supplies for the construction of new buildings and, to a lesser extent, for renovation.

In general, the construction of new buildings is more volatile than renovation. Consequently, building material firms are now more negative than contractors as new building production faces larger obstacles than the renovation market. We saw the same developments during previous setbacks: building material companies were more pessimistic than construction companies at the beginning of the Covid-19 pandemic and the earlier financial crises.

Building material prices are decreasing

The prices of many building materials peaked during the summer of 2022 and have steadily fallen since. The cost of timber and plastic inputs for construction companies have particularly fallen back but they’re still higher than their pre-Covid levels. This is due to weakening demand as economic growth is sluggish and construction volumes, especially of new buildings, are declining. The diminished supply chain disruptions after Covid have also eased the upward price pressure. However, the current trade impact of attacks on merchant ships in the Red Sea is just one example of the continued vulnerability in supply chains and could threaten further new price increases.

Prices of concrete, cement and bricks remain sticky

Building materials such as concrete and cement peaked during the summer of 2023 and have only undergone a marginal decline. The cost of these materials has benefited from declining energy prices as these are very energy-intensive to produce. You might expect significant price drops here, too, not least because demand from contractors is declining as new construction volumes decrease. Yet, output prices of these building materials have only come down marginally, by less than 1% in November 2023 compared to half a year earlier. And here are two reasons why concrete, cement and brick prices remain sticky:

Other input prices shot up

As energy prices decreased, the costs of other materials, such as sand, stone and clay, rose significantly. Although these materials are abundant, environmental regulations can make quarrying difficult, for instance, which squeezes supply. The cost of these materials has increased by nearly 25% in the past two years. These price hikes are smaller than the energy price fluctuations, but they more or less offset the energy price reductions in the last year for building material production.

Clay and sand are more essential components for the production than energy. We estimate that they account for two-and-a-half times more than energy costs.

Concrete, cement and bricks’ prices are less vulnerable than timber and steel

Timber and steel prices react relatively quickly to changes in the market. If stocks of suppliers and wooden building materials increase, we can see price declines within just one to two months. The (global) market for these products is very competitive, so changing purchase prices are quickly passed on.

Building materials such as concrete and cement are heavy and voluminous. That’s why they’re often traded on relatively small local markets, resulting in less competition. This gives the suppliers of these products more market power, which usually results in both higher prices and lower price volatility. They do not have to pass on price reductions of raw materials or energy costs directly because of the relatively limited competition. As a result, the output prices of these products rise – and fall – at a slower rate compared to building materials such as wood, which are traded in more competitive markets.

Few producers expect price declines

It looks like the strong price movements in building materials has come to an end. Only a small majority of steel, concrete, cement and brick suppliers expect to lower their sales prices. However, for metals shipped in containers, the Red Sea conflict poses an upside risk. The price fluctuations for timber also seem to be over. On balance, less than 1% of EU timber companies planned to increase their prices in December 2023.

Source: ING

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What we know and what we don’t, The Levelling-up & Regeneration Act

The Situation: The Levelling-up and Regeneration Act (“the Act”) was passed by Parliament and became law on 26 October 2023.

The Development: The UK government states that the Act will “speed up the planning system, hold developers to account, cut bureaucracy, and encourage more councils to put in place plans to enable the building of new homes.”

Looking Ahead: Many of the measures set out in the Act are not fully detailed (further regulations are required before they can take effect) and, while the changes are intended to simplify the planning regime, developers should closely follow the progress of implementing legislation over the coming months.

The Act, which was passed by Parliament and became law on 26 October 2023, largely provides a framework for a raft of future changes to the planning system. Many of these intended changes will first require the introduction of secondary legislation and new planning policy before they can take effect. At the moment, there is little guidance as to when the secondary legislation will be forthcoming, and with the prospect of a general election later this year, it is unclear when the substantive changes will come into effect.

We summarise below a few of the key changes to the planning system under the Act. These are yet to come into force.

Commencement Notices for Planning Permissions

Before commencing development pursuant to a planning permission, a developer will be required to submit a commencement notice to the local planning authority specifying the date on which the development is expected to begin. Failure to serve a notice will be a criminal offence liable on summary conviction to a fine of up to £1,000.

Developers will need to comply with this new requirement. The mandatory commencement notices will provide a formal record of when development commenced, which may be helpful in transactional due diligence.

Changes to the Roles of the Development Plan and National Policy in Determining a Planning Application

Section 94 of the Act introduces the concept of National Development Management Policies (“NDMP”), which will be national development and land use policies covering issues of general application across most areas (for example, heritage protection). These policies will be subject to consultation and are to be determined by the secretary of state.

Section 93 of the Act changes the roles of the local development plan and national planning policy in determining a planning application. If regard is to be had to the local development plan and any NDMP, the determination must be in accordance with the development plan and the NDMP, taken together, unless material considerations strongly indicate otherwise. However, if there is any conflict between a development plan and a NDMP, then the conflict must be resolved in favour of the NDMP. The long-established statutory primacy of the development plan is therefore eroded.

New Section 73B for “Permission Not Substantially Different for Existing Permission”

The Act inserts a new section 73B into the Town and Country Planning Act 1990 (“TCPA”) for “Applications for permission not substantially different from existing permission.” This is intended to help plug the gap between applying for wholly new planning permissions and the sometimes necessary practice of using two applications, one for “non-material amendments” under section 96A of the TCPA 1990 and one for “minor material amendments” under section 73 of the TCPA 1990, in order to secure amendments to proposed development schemes. The practice of submitting parallel applications arose following the Finney judgment, which ruled that the description of development cannot be amended by a section 73 application, thereby limiting its application.

Section 73B will come with certain limitations. For example, it cannot be used in respect of a planning permission granted under section 73 or 73A, and it cannot be used to alter the time limits for beginning work or for submitting reserved matters applications.

10-Year Time Limit for All Enforcement Action in England

The Act amends section 171B of the TCPA 1990 to extend the enforcement time limits for a breach of planning control comprising building without planning permission and change of use to a single dwellinghouse from four to 10 years. The abolition of the four-year rule for these breaches of planning control applies to England only (the four-year rule still applies in Wales).

This will be a significant change and will have an impact on transactional due diligence. Developers intending to submit an application for a certificate of lawfulness of existing use or development based on a four-year period should consider making the application as soon as possible before these changes come into effect.

New Infrastructure Levy Set to Replace CIL

The Act introduces a new charge on development called the Infrastructure Levy (“IL”).

All local planning authorities in England will be mandated to issue an IL charging schedule, rather than having discretion to do so as is currently the case with the Community Infrastructure Levy (“CIL”). The IL would be based on the gross development value rather than the development’s floorspace. The IL liability would be paid as and when the relevant development commences and in accordance with procedures to be set out in the IL regulations.

IL is intended to fund affordable housing as well as other local infrastructure and should reduce the circumstances in which a section 106 agreement is required. IL is also intended to replace CIL in due course (save for Mayoral CIL in Greater London and CIL in Wales, which will remain).

Until further regulations are issued by the secretary of state, there is some uncertainty as to how IL will interact with the existing CIL regimes and section 106 obligations.

Two Key Takeaways

  1. The Act became law on 26 October 2023, but many of the measures will not come into effect until secondary legislation and guidance is issued, and there is some uncertainty as to when this will happen.
  2. Although not all measures are in force yet, the Act includes significant changes which developers and their advisors should be aware of, in particular: (i) the requirement for commencement notices; (ii) changes to the relationship between development plans and national policy; (iii) a new section 73B of the TCPA 1990 for “permission not substantially different from an existing permission”; (iv) the 10-year time limit for all planning enforcement action in England; and (v) the introduction of a new IL, which is set to replace CIL.

Source: JD Supra

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Construction companies in ‘critical financial distress’

Nearly 8,000 construction companies in ‘critical financial distress’: report

Begbies Traynor’s latest Red Flag Alert report spells bad news for the construction industry, with the number of companies in critical financial distress growing by 32.6%.

The accounting firm’s report comes on the heels of the administration of Stewart Milne Group and Stewart Milne Homes North West England after the company was unable to find a suitable buyer. Last year, North Wales firm Brenig Construction also went under with £5.4m in debts, as did Lane End Developments Construction with a debt figure of £13m. Buckingham Group Contracting went bust in September.

As of the fourth quarter of 2023, Begbies Traynor put 7,849 construction companies down as being in critical financial distress, with another 83,332 in significant financial distress. Begbies Traynor noted that historically companies who have been on the critical financial distress list often go insolvent before the end of the year.

For the real estate and property services industry, the figures are 6,228 companies in critical financial distress and 62,176 in significant distress.

Construction and real estate were not alone in facing financial troubles – Begbies Traynor reported that the overall figures of companies in critical financial distress had grown by nearly 26% from the previous quarter – with 47,000 companies near collapse nationwide.

“After a difficult year for British businesses that was characterised by high interest rates, rampant inflation, weak consumer confidence, and rising and unpredictable input costs, we are now seeing this perfect storm impacting every corner of the economy,” said Julie Palmer, partner at Begbies Traynor.

“Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances,” she continued.

Ric Traynor, executive chairman of Begbies Traynor, did issue some silver lining.

“Later this year, we could see some respite for companies as inflation looks like it may reach more palatable levels, which in turn should result in interest rates starting to climb down from current heightened levels,” he said.

“Unfortunately, there are no signs of an easy fix and, with geo-political uncertainty continuing to rise and a hike in the national wage around the corner, the backdrop is hardly improving for an economy that is still firmly in recover mode post-pandemic.”

Source: Place North West

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Supply Chain Eases but Planning Still Hampers Housing

Proposed changes to England’s planning framework could see up to 77,000 fewer new homes likely to be built per year for the rest of the decade, slumping to the lowest level since the second world war and leaving the government’s 300,000 new homes a year housebuilding target in tatters.

For the fourth consecutive year, the top two major barriers to growth for SME developers are chronic delays in the planning system and under-resourced Local Authority planning departments. Both factors have severely impeded SMEs’ ability to deliver much-needed housing stock and have been compounded by rapidly increasing associated costs.

A new report, State of Play: Challenges and Opportunities Facing SME Home Builders, published by Close Brothers Property Finance, the Home Builders Federation and Travis Perkins shows that 46% of SME home builders saw an increase of over 30% in the costs of obtaining planning permission over the past three years.

This was before local authorities in England hiked planning application fees by as much as 35% from 6th December 2023.

Another major hindrance to SME home builders has been interest rate rises, cited by 72% as a major barrier. The Bank of England’s 14 consecutive rate hikes have hit the sector particularly hard.

Not only have home builders had to contend with higher borrowing costs themselves, but demand for new homes has dropped substantially as many buyers have been forced to reconsider how much they can afford to borrow, or in some cases put off buying a home altogether.

The report comes as all indicators point towards a sharp fall in housing supply amidst an increasingly challenging policy and economic environment.

Proposals to abolish mandatory housing targets were confirmed by the Government before Christmas, a decision that 80% of survey respondents said would be a barrier to growth as it will likely lead to more Local Authorities withdrawing their Local Plans (over 60 have already done so) and further delay and confusion for all parties.

SME home builders have also faced more than four years of uncertainty over the nutrient neutrality issue that is currently holding up around 150,000 desperately needed new homes despite the negligible impact on river quality their occupation would have; whilst demand remains constrained as a result of high-interest rates and the lack of a government support scheme for first-time buyers.

On a more optimistic note, the number of SMEs citing the supply and/or costs of building materials as a major barrier to growth dropped significantly in the past year, from 79% to 42%. Global supply chains have largely recovered following the Covid-19 pandemic and war in Ukraine.

The cost and supply of labour are similarly perceived by fewer SMEs as a major barrier to growth than last year (41%, down from 64%), suggesting a softening in the labour market.

SMEs are also paving the way forward for sustainable housebuilding. Nearly two-thirds (64%) of SMEs are building homes which include sustainable technologies and features that go beyond the requirements of building regulations; with over 60% including photovoltaic panels, air/ground source heat pumps, high-performance double-glazed or triple-glazed windows and preservation/protection of wildlife and nature.

Rowland Thomas, Managing Director, Close Brothers Property Finance, comments:

“Navigating an under-resourced planning system continues to present the greatest challenge to SMEs, who unlike larger housebuilders aren’t in a position to direct capital into new projects when there are delays.

“To make matters worse, there are now increased planning application fees to contend with. One would hope that the extra revenue these generate will be used to boost resources, but as the money won’t be ringfenced there is sadly no guarantee.”

“The major change in the fiscal environment has also been a blow to the sector. Consecutive interest rate rises have not only impacted construction and labour costs but also stifled mortgage liquidity and buyer demand.

“Thankfully rates appear to have reached their peak in the current cycle and there is growing confidence that rate cuts may be as soon as Q2 this year. It is also very encouraging to see SMEs leading the charge in sustainable development, yet another compelling reason to ensure we support more of these businesses and remove the obstacles for growth.”

Stewart Baseley, Executive Chairman of the Home Builders Federation says:

“The house building industry faces some major barriers to delivery and all indicators now show sharp falls in supply. SMEs in particular are unable to manage the delays caused by the collapse of the planning system and the lack of capacity in planning departments.

“The increasingly onerous policy and regulatory environment has seen the number of SME builders plummet in recent years, and we urgently need to see a reversal of the anti-development approach by the Government or more companies will disappear. SMEs are vital to the industry’s ability to deliver the homes we need and play a vital role in training and communities across the country.”

James Mackenzie, Managing Director, Travis Perkins, says:

“One positive from the last year is that supply chain constraints have largely eased, something that is reflected in the survey, with 42% of SME homebuilders citing ‘Supply and cost of materials’ as a major barrier to growth, down considerably from 79% in the previous iteration of the report.

“A key objective of ours as a materials supply partner is to deliver best-in-class products and bespoke services to meet the needs of our customers. This can help to ensure that SME homebuilders not only survive the current difficult market conditions but go on to thrive as they deliver quality homes and tackle Britain’s housing shortage.”

Source: Property Reporter

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