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Small construction firms crying out for lifelines

Responding to the fall in the Construction Purchasing Mangers’ Index (PMI) to 48.1 in September, the first drop below the 50.0 no-change threshold in 13 months, Mike Cherry, Federation of Small Businesses (FSB) National Chairman, said:

“Policy-makers have serious questions to answer about the decline in construction output highlighted by today’s PMI. Our latest research shows that changes to tax reliefs, levies and employer obligations have caused costs for small firms in the construction sector to rise at a faster rate than in any other industry. These policy-linked costs have increased by 34 per cent for construction firms compared to a cumulative CPI figure of 7.7 per cent for the five years to 2016.

“Being a labour-intensive industry, changes to minimum wage rates, pension auto-enrolment and increasing employer National Insurance Contributions have all had their part to play. We’ve heard those in power talk for years about the need to tackle the housing crisis. Yet they’ve simultaneously heaped additional costs on the very business owners who can help increase our supply of homes.

“Confidence among small construction firms has plummeted over the last year. Businesses across the sector will be looking to the Communities Secretary’s speech later this week, as well as the Autumn Budget, for urgently needed lifelines in an uncertain climate characterised by year on year increases in operating costs.”

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Sadiq Khan cracking down on pollution from construction sites

The Mayor of London, Sadiq Khan, has today called on the Government to grant him additional powers so that he can effectively tackle non-road pollution sources in the capital.

Only half of the capital’s air pollution is caused by on-road vehicles and Sadiq believes London needs more powers so that it can combat pollution from the River Thames, emissions from machinery used on construction sites and pollution from the domestic burning of solid fuels.

Since becoming Mayor, Sadiq has more than doubled investment in tackling air quality to £875 million over the next five years. He has also introduced the boldest plans to tackle air pollution in the world, including a £10 Toxicity-Charge (T-Charge) which will start in October this year, the introduction of the world’s first Ultra Low Emission Zone (ULEZ) in 2019 (subject to consultation), and the cleaning up of London’s public transport fleets such as buses and taxis so that they lead the way in ultra-low emission technology.

Sadiq has now written to Michael Gove, the Secretary of State for Environment, Food and Rural Affairs, setting out the additional powers that he believes are required.

The Mayor of London, Sadiq Khan, said “Non-transport sources contribute half of the deadly emissions in London so we need a hard-hitting plan of action to combat them similar to moves I am taking to reduce pollution from road vehicles.

“With more than 400 schools located in areas exceeding legal pollution levels, and such significant health impacts on our most vulnerable communities, we cannot wait any longer and I am calling on Government to provide the capital with the necessary powers to effectively tackle harmful emissions from a variety of sources.”

The Mayor is requesting new powers in the following areas:

Non-Road Mobile Machinery

Non-Road Mobile Machinery (NRMM) such as diggers and bulldozers are currently the second largest source of ultra-fine particulate matter (PM2.5) emissions in London and the fifth largest source of oxides of Nitrogen (NOx). This is likely to grow as traffic related emissions decline and as construction increases across London.

Sadiq wants greater powers for the capital to enforce the standards of the Non-Road Mobile Machinery Low Emission Zone (NRMM LEZ) – a scheme that uses the Mayors planning powers to impose minimum emissions standards for machinery used on construction sites.

Sadiq does not believe this scheme is as rigorously applied by the boroughs as it could be, especially where they already have stretched resources.

He has already invested £400,000 so that local authorities can better enforce the zone. However, he is keen to ensure that boroughs, or GLA bodies have greater ability to apply the standards.

He also thinks it should be possible for the rules of the NRMM LEZ to be applied across the board to existing planning permissions and to other users of NRMM as the current regulations mean that more than 1,000 sites are not registered and activities such as roadworks and events are not covered at all.

Sadiq also wants either himself, or another appropriate authority, to have the power to set minimum emission and technical standards for all NRMM used in London. This could be done by amending the GLA Act so that the Mayor can use his powers to regulate NRMM in the same way as he can for road vehicles.

In order to support these powers, Sadiq wants the creation and maintenance of a DVLA-style national database for NRMM.

River and canal emissions

There are currently at least five different regulators that play a role in policing emissions. In addition, current emission regulations only apply to new vessels.

With ambitious plans in the growth of traffic on waterways, unless sufficient controls are introduced, the number of people exposed to this source of pollution will only grow.

Sadiq wants to see the regulations simplified so that there is a single regulator with the ability to charge and enforce and a single emissions control framework. The body would also be able to set minimum emission and other technical standards for specific classes or types of vessels. It would also provide clarity for local, national and international shipping accessing the Thames and canals.

In the meantime, Sadiq is leading by example with the vessels that are owned or run by Transport for London (TfL). The new Woolwich Ferries that will be entering in to service next year will be some of the cleanest vessels working on the river. TfL will also shortly be retro-fitting a Thames Clipper boat with emissions-reduction technology. If successful, this could provide an important example of how existing boats can reduce their pollution.

The Mayor currently does not have any formal powers to control emissions from vessels on the River Thames or the canal network but has recently set up a Thames and London Waterways Forum, which will bring together the regulators and other stakeholders to ensure that growth in the use of London’s waterways is co-ordinated and sustainable.

Wood and solid fuel burning

Current controls on emissions from domestic burning of solid fuels like wood and coal are obsolete, with the definitions barely revised from the original Clean Air Act of 1956. For example, terms like ‘dark smoke’ and ‘smokeless’ don’t reflect a modern understanding of pollution – which can be invisible.

The Mayor’s recently published Environment Strategy set out his ambition to reduce emissions from this source, but without reform of the existing Clean Air Act this is likely to be limited in impact.

The Mayor wants the Clean Air Act to be amended to allow for the creation of zones where the burning of solid fuel is not allowed. These would complement his existing plans to create transport zero emission zones in small areas from 2025 onwards. In addition, the Clean Air Act should be reformed, so the Mayor can set tighter emission limits for new domestic heating appliances like wood burning stoves for pollutants such as PM10 and PM2.5 that are invisible and are known to have a detrimental effect on health.

To ensure these new zones are effectively implemented, local authorities should be given enhanced powers to ensure compliance, including the ability to inspect and enforce, such as by issuing penalty charge notices. Similar powers could also be used to address emissions from larger and commercial premises.

The Stove Industry Alliance and Woodsure, the UK’s woodfuel accreditation scheme, have recently launched their voluntary “ecodesign ready” and “Ready to Burn” labels for stoves and fuels to help consumers make the right choice in London and other smoke control areas. The Mayor believes that more should be done to empower consumers to make the right choice, including better information at the point of sale and mandatory labelling of products that are legal to use in smoke control areas.

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Call to Government to back infrastructure plan to de-carbonise UK buildings

As the Government prepares to publish its Clean Growth Plan, a major alliance has called for an ambitious new infrastructure programme to help to decarbonise the UK’s buildings and, in the process, boost the economy.

With one-third of UK carbon emissions coming from buildings, the report, “Affordable Warmth, Clean Growth”, recommends a comprehensive Buildings Energy Infrastructure Programme and dedicated delivery agency to achieve major energy savings and de-carbonise the UK heating supply. Prepared by leading consultancy Frontier Economics, it sets out an action plan to make all homes energy efficient within 20 years.

Achieving this goal will require the adoption of world-leading quality standards for retrofitting and constructing homes, area-based schemes led by local authorities, additional funding sources that won’t raise energy bills and financial incentives to encourage households to take up energy-saving measures.

Key recommendations include:

  • A target for all homes to be brought up to an energy performance rating of C (on the A to G scale) by 2035, with all low-income households achieving a C rating by 2030
  • A requirement for new homes to be constructed to a zero-carbon standard by 2020
  • Subsidies for all low-income home-owners to make energy efficiency renovations to their properties
  • A demonstrator programme to test the most attractive schemes to unlock able-to-pay households’ investment in energy saving renovations, including zero interest loans, low interest equity loans you don’t have to pay back until a home is sold and salary sacrifice schemes like those for childcare vouchers
  • Changes to Stamp Duty to encourage renovations when people move home
  • Tax allowances for private landlords and 50% subsidies for social landlords to undertake energy efficiency renovations

It also recommends strengthening regulation in the private rented sector from 2025 to prevent landlords from renting out homes which have below average energy performance, and applying sensible minimum standards when homes are sold to help address health risks and deaths caused by excessive cold. The regulations and minimum standards, properly enforced, can significantly bring down the cost of the programme to the public purse.

There are 19 million homes in the UK with needlessly poor levels of energy performance (below a C rating). Up to a quarter of the energy consumed in homes could be saved cost-effectively, with the technical potential for energy use in homes to be cut in half. Despite this, the level of funding for energy efficiency measures has been cut by 50% since 2012 and the number of major insulation and efficient heating measures being installed has crashed by 80%. The alliance is calling on the Government to reverse that fall and to make buildings’ energy performance a capital infrastructure investment priority.

The Rt Hon. Lord Deben said in support of the report: “This is market failure at its most pernicious and the Government needs to intervene to make the free market work. This is a properly constructed infrastructure programme that provides a cost-effective way of meeting our climate change objectives while significantly reducing the cost of living for a huge proportion of the population”.

Claire Thornhill, an author of the report from Frontier Economics said: “Buildings are an integral part of our energy infrastructure system. If we are to de-carbonise in a cost-effective way and keep energy bills as low as possible we need an integrated and ambitious infrastructure programme to de-carbonise our buildings.”

The Plan would require public investment in household energy efficiency to be increased by £1.1 billion per year – from £0.6 billion today to £1.7 billion. A previous Frontier Economics report that analysed Government data found that an energy efficiency programme achieves comparable economic returns to other infrastructure programmes.

The Government plans to spend £170 billion on housing, economic infrastructure and R&D programmes up until 2021/22. However, buildings energy performance does not yet feature in the Government’s infrastructure plans despite the fact that it would help households to save on average £270 every year off their energy bills, boost the economy and reduce the need for new energy supply infrastructure investment elsewhere. The Building Energy Infrastructure Programme is designed to leverage in £3.9 billion of private investment per year.

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Global standards vital to boosting infrastructure investment

The adoption of regulated internationally recognised standards can increase the UK’s ability to attract private infrastructure investment to offset the fall in public sector spending, according to a new paper which was launched by the RICS at the Labour Party Conference today.

According to the paper, the adoption of regulated internationally recognised standards can increase the UK’s ability to attract private infrastructure investment to offset the fall in public-sector spending.

Launched at the Labour Party conference in Brighton at an event attended by Shadow Housing Minister Tony Lloyd, the paper titled “Attracting Infrastructure Investment Through International Standards” sets out the case for using International Construction Measurement Standards (ICMS) to attract private investment in infrastructure projects.

Successfully enticing investors will play a vital role in Britain to mitigate recent contractions in the construction sector as Brexit discussions continue.

With the UK’s ageing infrastructure currently depleting and at capacity, and public sector investment set to fall from to 1.4%t of GDP by 2020 – from 3.2% in 2010 – the private sector has a critical role to play in updating and delivering new infrastructure.

ICMS is a key tool in managing investments, providing certainty to industry and attracting investment.

Revenue generating projects

The paper also calls on government to take a more proactive role in supporting infrastructure by identifying projects that will generate revenue, providing guarantees to minimise investor risk during the construction phase and providing certainty by seeking cross-party support for projects.

Mo Rahee, RICS Infrastructure Policy Manager said “Like the International Financial Reporting Standard, the International Construction Measurement Standard provides a level of certainty – through transparency – to investors. Effective and accurate reporting of capital expenditure can only benefit the construction sector by providing investors with accurate information that inform their investment decision process.

“Government can also support the sector by identifying projects that will generate long-term revenues and have cross-party support. This will be vital to ensure infrastructure is updated and new projects are delivered.”

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Construction workers threaten strike at Hinkley Point as pay offer rejected

Construction workers employed at Hinkley Point have overwhelmingly rejected a pay offer in the longstanding dispute over pay and bonuses on the project.

The unions concerned, Unite and the GMB, will now go ahead with notifying the companies concerned of their intention of holding an industrial action ballot and then progress to ballot members for strike action.

The workers overwhelmingly rejected the proposed pay increase, with over 95 per cent voting against the proposals in a consultative ballot. Members were told that the rejected offer was the best that could be achieved “through negotiations”.

The dispute, which has been ongoing since the spring, concerns the pay of workers engaged on civil engineering contracts at Hinkley Point which is the largest construction project in Europe. There are already over a 1,000 workers employed on these contracts at Hinkley Point.

Negotiations on the pay offer have involved the client EDF and the main contractor BYLOR (the principal contractor Laing O’Rourke and Bouygues TP) as well as the unions.

A ballot for strike action was called off in June after an interim agreement on bonus payments was agreed. The three month agreement was extended into September in the hope that a permanent deal could be made.

One of the principal issues is that the pay rates for workers on civil engineering contracts are significantly below the rates of workers covered by the mechanical and engineering (M&E) contract.

Unite national officer for construction Jerry Swain said “Members have made their views clear; the unions warned the amount of money being offered was not sufficient and this has proved to be the case.

“The client and contractors need to understand that this is a high profile, complex project, built in a tightly controlled secure zone, which is being built in an isolated part of the UK. It cannot and will not be built on the cheap.

“For too long the construction industry has treated workers on civil engineering projects as the poor relations and these attitudes are no longer acceptable. The employers have set the benchmark with the mechanical and engineering agreement they need to come forward with an offer that meets our members’ expectations.

“There is a window between now and the commencement of any industrial action to still resolve this dispute, provided the client and the contractors come back with an improved offer. The unions are fully prepared to return to the negotiating table if an improved offer is put forward.”

Phil Whitehurst, GMB national officer for construction, said “The ballot result is a clear indication that the national officers of both GMB and Unite have to get back round the table with EDF as matter of urgency.

“We will be seeking meetings with EDF as soon as possible to solve this situation on behalf of our members.”

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Construction industry forecasts good news for UK contractors and manufacturers

Construction Industry Forecasts for 2017 to 2019 estimate an overall rise of 7.4% for new-build infrastructure in the UK this year, with a continuation of 6.4% next year. It’s news that bodes equally well for leading suppliers of concrete repair and protection solutions such as Sika, as an increase in new buildings will inevitably lead to defects in newly-poured concrete requiring onsite attention.

So, what is this positive outlook for the country’s new building output based upon? Well, a number of factors across a number of key infrastructural sectors appear to be driving the optimism. Forecasts for the harbours and waterways sector are particularly encouraging, with year-on-year growth predicted thanks to huge waterside projects planned across the country in the coming years.

There’s the Aberdeen Harbour Expansion project for example. Commencing in September this year, the £350 million scheme – due to be completed in 2020 – will see the existing site expanded to include a facility for oil industry decommissioning work. Other upcoming UK harbour projects include a £135 million redevelopment of the port of Dover, and a £10 million project to build a new link-span bridge at the Port of Heysham in Lancashire.

Water spend

Upgrades in water treatment works are also continuing nationwide as part of Asset Management Period 6 which runs from 2015 to 2020. Water firms will have spent more than £44 billion in that time on improvement works agreed by water industry regulator, Ofwat, that include the Severn Trent Water’s Birmingham Resilience project, Wessex Water’s integrated supply grid, and the modernisation of United Utilities’ Davyhulme wastewater treatment plant. Work on London’s £4.2 billion Thames Tideway Tunnel project, which is being financed and delivered by an independent provider, is also boosting construction in this sector.

Spending on road maintenance is also expected to rise. Highways England has a maintenance budget of £1.3 billion over its first fixed five-year investment period, which began in 2015/16. In 2017/18, expenditure on maintenance is set to increase to £258 million, from the £254 million allocated for 2016/17.

Thereafter, it is expected to increase in 2018/19, before slowing in 2019/20. However, 97% of the roads network is governed by local authorities, which are financially-constrained due to cuts in central government funding since 2010. Whatever monetary restrictions councils face there is little doubt the condition of the country’s roads require urgent address, as an Annual Local Authority Road Maintenance Survey (ALARM) report revealed a 13-year backlog of local roads maintenance in England.

Energy drive

Infrastructure repair and maintenance is also expected to increase in order to maintain the country’s energy provision. With a delay in the building of nuclear power stations, National Grid announced it would be retaining the services of existing power plants initially earmarked for closure. Structural maintenance is likely to be required to extend the lifespan of the plants which will be held in reserve to boost electricity supplies if and when required.

Construction Industry Forecasts – headline figures for 2017 to 2019

  • Construction output to grow by 1.6% in 2017 and 0.7% in 2018
  • Private housing starts to rise by 3.0% in 2017 and 2.0% in 2018
  • Infrastructure construction to grow by 7.4% in 2017 and 6.4% in 2018

Construction Industry Forecasts for public housing repair, maintenance and improvement is a little less encouraging, with output in this sector expected to remain flat in 2017 and 2018, whilst commercial offices output is expected to fall by 1% and 12% during the same period. However, prospects for the builders of the nation’s infrastructure, and the contractors and manufacturing firms required to maintain it remain distinctly good. It would seem the UK is building towards a brighter future.

For more information click here.

By Charles Pierce, National Sales Manager – TM Refurbishment

Charles Pierce

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Grenfell fire increases demand for building works

A survey carried out by US recruitment firm Manpower has found that of more than 2,000 UK employers confidence among public sector firms had improved radically in the last three months, in the wake of the Grenfell Tower tragedy.

Participating British businesses were asked how they viewed the jobs market and whether they had plans in the pipeline their workforce over the next 12 months. Those in the UK construction trade reported a net employment outlook of +11% for the final quarter of 2017.

That represents the strongest outlook of any UK sector and a 6% increase on the third quarter.

The Grenfell Tower fire in June spread through cladding on the building which subsequently failed safety tests, claiming at least 80 lives.

Many other public housing projects — predominantly high-rise buildings — have since failed safety tests due to unsafe cladding.

James Hick, managing director for Manpower Group Solutions, said expansion in the UK construction trade was driven by those bids to improve public housing.

Hick commented “Construction hiring often slows in the winter months, but the UK is set to buck the trend this year — our data suggests this could be the strongest fourth quarter for hiring since 2005.

“Some of this work is the urgent testing and repair that is being carried out up and down the country on much of Britain’s public housing stock.

“The state of housing in the country is under the microscope like never before and the need for both building and remedial work have caused demand in the construction industry to shoot up.

“The tough reality lurking beneath all these positive indicators is that these hiring intentions may not come to fruition because of difficulties attracting and retaining skilled employees.”

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Hiring on the up as construction sector confidence grows

  • Construction sector confidence also up, boosted by social housing repairs
  • Skills shortage time-bomb lurks on the horizon
  • Hotels and restaurants sector slumps as consumer spending dips

Against the backdrop of record employment and ongoing Brexit negotiations, ManpowerGroup reveals that employers have recorded a one point uptick in optimism with a national Outlook of +6%. A surge in positivity among public sector employers is a key factor in the improved national picture, with hiring intentions in this sector up 4 points to +2%, the biggest rise since 2015.

The ManpowerGroup Employment Outlook Survey is based on responses from 2,100 UK employers. It asks whether employers intend to hire additional workers or reduce the size of their workforce in the coming quarter. It is the most comprehensive, forward-looking employment survey of its kind and is used as a key economic statistic by both the Bank of England and the UK Government.

James Hick, Managing Director for ManpowerGroup Solutions commented “This is the first time in over a year that public sector hiring plans have been in positive territory. June’s general election outcome was seen in part as a rejection of austerity, and it looks like the public sector is powering on, as hiring ramps up. At the beginning of the year there were 86,000 vacancies in the NHS; the government recently announced that it will train an additional 1500 doctors a year and create 20,000 new mental health posts. With the health service so heavily dependent on EU nationals, these hiring targets are going to be extremely difficult to meet. And that’s just the NHS – there are also tens of thousands of vacancies in other government departments.”

High demand for construction workers is also buoying national jobs optimism. Construction is the most upbeat sector this quarter, up six points to an Outlook of +11%. Hick continues: “Britain’s builders are as optimistic now as at any time since the financial crisis. Construction hiring often slows in the winter months, but the UK is set to buck the trend this year – our data suggests this could be the strongest fourth quarter for hiring since 2005. Some of this work is the urgent testing and repair that is being carried out up and down the country on much of Britain’s public housing stock. The state of housing in the country is under the microscope like never before and the need for both building and remedial work have caused demand in the construction industry to shoot up.”

However, there are also signs that the positive effects of these short to medium-term factors are hiding real pressure points in the labour market as chronic skills shortages and a squeeze on disposable incomes could prick the good news bubble.

Hick explains “The tough reality lurking beneath all these positive indicators is that these hiring intentions may not come to fruition because of difficulties attracting and retaining skilled employees. Take construction, where companies are reporting a stronger pipeline of work than they have for years. However, without a pool of skilled workers to actually do the work, buildings will go unbuilt and projects will flounder. There is lots of talk around what we need to do to fix the UK’s ailing housing market at present but politicians’ promises are just hot air without the essential skilled talent needed to deliver these programmes.”

“The housing market holds another potential pressure point once interest rates inevitably start to rise. Wage growth has also been lagging inflation in the past few months and this gap looks likely to increase. People are starting to feel the pinch, and possible rising interest rates will only exacerbate this. The early signs of this can be seen in the 6 point slump in the Hotels and Restaurants sector, which is heavily dependent on discretionary consumer spending. We have recently seen restaurant chains such as Jamie Oliver’s “Jamie’s Italian” brand closing sites and some restaurant brands are scrapping expansion plans as consumer spending looks set to dip and the competition in this crowded market gets tighter.”

Regionally, confidence in London, where housing and the broader cost of living is the highest, has halved to +4 since last quarter. The East of England forecast tops the charts at +11, while employers in the South East maintain their confident streak with an Outlook of +10. Another winner is Northern Ireland following the DUP-negotiated “supply and demand” deal resulting in a cash injection of at least £1 billion. This has already boosted hiring optimism in Northern Ireland, where employers report a surprise jump ahead of the UK national average to +7% this quarter.

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Mayor’s focus on small construction sites can help solve London’s housing crisis

The London Housing Strategy’s strong focus on bringing forward more small sites will help solve the housing crisis by opening up the market to SME house builders, according to the Federation of Master Builders (FMB).

Commenting on the draft London Housing Strategy, Barry Mortimer, Director of FMB London, said “If we’re to build the number of new homes Londoners need, we must urgently make much better use of the many existing small sites that are dotted all over London. In doing so, we will the strengthen the capacity of SME house builders to build more new homes and perhaps even attract some new SME firms into the market. FMB research has consistently shown that a lack of available and viable land is the main factor stunting the ability of small builders to deliver more homes. Indeed, over half of SME house builders believe that the number of small site opportunities is, if anything, decreasing.

“We therefore welcome strongly the Strategy’s proposal for a presumption in favour of appropriate residential development on small sites, which goes further than proposed changes to national policy as laid out in the Government’s Housing White Paper. The ‘Small Sites, Small Builders’ programme will also link up public land owners with small builders, which could make accessing public land easier for small firms. We also welcome moves which will mean that less of the Community Infrastructure Levy is payable upfront on small sites. This will really help with cash flow for smaller builders and make the economics of small scale development slightly easier.

“The London Housing Strategy therefore marks a step forward in empowering smaller house builders in London. In order to reach the 50,000 new homes London needs to build each year, this renewed emphasis on small sites is vital. However, all such progress could be undermined if the Mayor fails to protect small sites from onerous levels of developer contributions. National planning guidance states that planning obligations should not be sought from developments of ten units or fewer, but implementation of this policy in London is patchy at best. Unless the Mayor, and London Boroughs, recognise the need to minimise burdens on the very smallest developments, SME builders will continue to struggle to enter the market.”

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