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Strong start for construction in 2017 as housebuilding flourishes

The construction industry has started 2017 strongly, with an increase in activity levels as the value of new building contracts awarded in January reached £6 billion, spearheaded by strong figures from the housebuilding sector.

According to the latest edition of the Economic & Construction Market Review from industry analysts Barbour ABI, housing figures increased sharply across January, with construction contract value reaching £2.7 billion, a massive 83 per cent increase compared with January 2016.

Housebuilding

Of all the type of projects across housebuilding, it was private housing that dominated in January, with 91 per cent of the total construction contract value in January, compared to just 66 per cent a year ago. Market conditions for private housing were also favourable for housebuilders in 2016, with Crest Nicholson recently reporting a 27 per cent increase in full year profits.
There are also currently £5.8 billion worth of housebuilding contracts that are nearing award status, suggesting this month’s growth is likely to continue over the next few months and beyond.

London unsurprisingly led all regions based on total construction contract value in January, accounting for 26 per cent. This was helped greatly by the £900 million One Nine Elms Twin Towers development, the largest project recorded on the month.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said: “Whilst the housebuilding sector is performing admirably, we expect to see its growth continue to flourish across 2017. However, other sectors now need to start producing more auspicious figures, such as the commercial & retail sector, which saw a year-on-year decrease of 40 per cent last month. Infrastructure, another traditionally big performing sector, is also in a slump with January figures being the lowest for 12 months.”

“On the positive side, the number of projects awarded in January jumped by 50 per cent compared with December and 25 per cent when looking at January last year. These figures are encouraging and would suggest that work is most certainly on the way.”

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RIBA reveal what UK architects really think about Brexit

Results from the most comprehensive post-referendum survey of architects have been published by the Royal Institute of British Architects (RIBA). The RIBA Members Brexit Survey results give an insight into the major concerns and opportunities from architects across the industry.

  • 60% of architects have seen projects delayed, cancelled or scaled back
  • 40% of UK-based non-British EU nationals are now considering leaving the country
  • Architects think Brexit offers chance of wholescale reform of the UK’s inefficient public procurement system
  • Strong support amongst architects to maintain high product and environmental standards and ensure that UK architects’ qualifications continue to be recognised in the EU and are in future recognised in other key markets too.

Over 65% of architects are concerned about the impact of Brexit on their business and any uncertainty is unsettling. However, as agile and business-savvy professionals, architects have been quick to see the potential industry benefits from the UK exiting the European Union. From trade agreements with new markets, reform of the UK’s public procurement system and increased public sector and private sector investment, our members have made it clear that with the right decisions the short-term impacts of Brexit can be mitigated, and the UK can position itself as a global facing nation.

In response to the concerns and opportunities raised by its chartered members, RIBA has today published a set of five priority recommendations for Government: Global by Design: How the government can open up new opportunities for UK architects. In order to maintain and strengthen the UK as a global hub for architecture, the Government must ensure the UK:

  • Has access to the best talent and skills
  • Signs trade agreements that open access to foreign markets
  • Provides support for education, research and innovation
  • Takes action to address the UK’s competitiveness crisis including infrastructure investment
  • Maintains common standards and low compliance costs.

RIBA President Jane Duncan said “Architects recognise that the UK must shape a new role for itself after we exit the EU – and we are already responding to that challenge. But we need leadership and support from the Government if the UK is going to maintain and strengthen its role as a global centre for architecture, responsible for innovative and inspiring buildings in the UK and across the world.

“To do that we need the Government to secure the agreements that ensure that our qualifications continue to be recognised in the EU and increasing access to new markets outside of the EU, maintain high common product and environmental standards consistent with brand UK abroad and address the structural challenges that threaten the UK’s attractiveness as a place to live, work and invest.”

“I’m pleased that the Government’s Brexit White Paper highlights a number of the key issues that we’ve been raising with ministers, but there is still a long way to go – particularly on the issue of who can work here. We can’t shut our doors to talent and expect the world to open its markets to us. The UK needs an immigration system that recognises the benefits and importance of the UK being an attractive place to work for ambitious architects from around the world. It’s vitally important that the Government acts to confirm that those already working and studying in the UK will be able to remain.”

The RIBA Members Brexit Survey report and the RIBA’s Brexit recommendations, Global by design: How the government can open up new opportunities for UK architects, can be viewed at www.architecture.com/brexit.
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VIDEO: Quintain’s plans for Wembley

With funding and planning secured, construction at Wembley Park will be at a pace not seen at any other major development site, with 5,000 homes under construction over the next 7 years.

Wembley Park will be the largest single-site purpose built PRS (private rental sector) development anywhere in the UK after Quintain announced its intention to deliver the remaining private homes at Wembley Park as build to rent. 5,000 homes for rent will be available at Wembley Park, all under Quintain’s ownership, and will be delivered in phases over the next seven years.

By the end of 2017, there will be 3,000 homes under construction, alongside a new seven acre public park, a new landscaped London square, a three-form entry primary school and a wide range of shops, restaurants and workspaces to complement the existing Wembley Park shopping and entertainment offering. Quintain’s next Tipi apartment building will be available for occupation this summer.

Quintain has already invested £900 million in the transformation of Wembley Park and has a further £800 million of funding secured, with planning permission in place. It is expected that on completion, Wembley Park will have created over 8,500 permanent new jobs across a range of sectors, in addition to the jobs created during construction.

Angus Dodd, Chief Executive of Quintain, said “Our commitment to build to rent at Wembley Park means we can deliver the homes London needs far faster than if we were selling homes privately and ensures they will be occupied very shortly after they are complete.

“This long term commitment also means we can design homes specifically for the needs of today’s generation of renters and provide fantastic shared facilities and professional management arrangements which our residents love. We will ensure no apartment is left empty.”

Sadiq Khan, Mayor of London, added “This development will provide 5,000 much-needed private rented homes for Londoners. It will take time to fix the housing crisis, but at City Hall we are committed to help deliver schemes like this that will increase the supply of homes across the capital.”

Build-to-rent can help fix ‘broken housing industry’

A new report, produced by the British Property Federation (BPF) and Savills in conjunction with the London School of Economics, proposes that the purpose-built rental sector could deliver as many as 240,000 new homes by 2030.

If, for example, just one fifth of the large residential sites currently being built on incorporated build-to-rent, it could increase annual home delivery by 6%. Put into context, this is around 10,000 new homes a year relative to the 164,000 new homes completed in England in 2015/16.

In conjunction with the supply already set for delivery over the next three years, it would take total build-to-rent output to 15,000 new units a year, and to 240,000 over the next 13 years.

Ian Fletcher, Director of Policy at BPF, explained “By measuring build-to-rent’s growth and the other benefits it delivers, and what gets in its way, we want to show to government the sector can be an important partner to its ambitions to build more homes.”

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Government needs to take note of worsening construction skills shortage now, warn industry experts

The skills shortage in the construction industry has got worse and has now spread beyond bricklayers and carpenters to other key trades, according to recent research by the Federation of Master Builders (FMB).

The FMB’s State of Trade Survey for Q4 2016 shows that:

  • Almost half of construction SMEs are reporting difficulties hiring roofers (46%)
    Shortages of electricians and plasterers are at their highest point in four years
    The SME construction sector has experienced fifteen consecutive quarters of growth.

Brian Berry, Chief Executive of the FMB, said “We’ve been experiencing a severe shortage of bricklayers and carpenters for quite some time – these latest statistics show that skills shortages are now seeping into other key trades such as roofers and plumbers. Indeed, of the 15 key trades and occupations we monitor, 40% show skills shortages at their highest point since we started to feel the effects of the skills crisis in 2013 when the industry bounced back post-downturn. This growing skills deficit is driving up costs for small firms and simultaneously adding to the pressure being felt by soaring material prices linked to the weaker pound.

“The Government needs to be taking note of the worsening construction skills shortage now that we know that the UK will be negotiating a hard Brexit. The Prime Minister must ensure that the immigration system that replaces the free movement of people serves key sectors such as construction and house building. Our sector relies heavily on skilled labour from the EU, with 12% of the British construction workforce being of non-UK origin. As the construction industry represents around 7% of UK GDP, it’s in no one’s interest to pull the rug out from under the sector by introducing an inflexible and unresponsive immigration system.

“On a more positive note, construction SMEs reported steady growth in the final three months of 2016, capping off a generally positive year for the industry. In particular, demand for private refurbishment work was robust throughout 2016 and in terms of private and social house building, builders expect workloads to grow in the first three months of 2017. However, if the Government wants the objectives of its Housing White Paper to be realised, it will need to ensure the construction sector has the skilled workers it needs to build these new homes.”

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Expectations for construction workloads regain lost ground

Expectations across the construction sector have now regained the ground lost post the EU vote, according to the latest Royal Institution of Chartered Surveyors (RICS) Construction Market Survey, Q4 2016.

  • National workloads still positive with the private housing displaying strongest momentum
    Road and rail set to be the fastest growing infrastructure sectors over next twelve months
    Expectations for workloads, employment and profit margins improve

An overview

Following a noticeable dip around the time of the EU referendum, expectations for output growth over the year to come strengthened for the second consecutive report. Indeed, the twelve month workloads expectations series improved to post a reading of +57% (following +49% and +23% in Q3 and Q2 respectively).

Alongside this, employment expectations improved for the second straight report, with 41% more respondents anticipating a rise in construction sector employment over the year to come. As such, both employment and workload expectations have now recovered to their pre-referendum levels.
The latest results point to modest growth across the sector in the final quarter of 2016, with 18% more respondents reporting an increase in total workloads. However, while the data is broadly positive, the anecdotal comments left by chartered surveyors do continue to highlight uncertainty surrounding the departure from the EU to be dampening investment and activity.

During Q4, output increased in most sub sectors except public non-housing. Following the pattern of the last three quarters, the strongest quarterly rise in workloads was reported in the private housing sector. 27% more respondents cited an increase in private housing workloads (rather than a decrease). A rise in workloads was also reported in the private commercial and infrastructure sectors.

Meanwhile, both output and input costs rose in Q4 2016 with input prices extending a run of uninterrupted growth stretching back to Q2 2010.

Forthcoming

Over the next twelve months, respondents continue to expect the road and rail sub categories of infrastructure to post the most significant increases in construction output at the national level. Regionally, expectations for growth in railway output lead the way in London, the North West, Yorkshire & Humberside, Wales and the West Midlands. Meanwhile, expectations for growth in road construction activity come out on top in all other areas of the UK.
Skill shortages continue to be a key impediment to growth in the sector, although they have eased in five consecutive reports. Interestingly however, the one area that remains a particular concern is the shortage of quantity surveyors with 66% of respondents highlighting a gap. This is the highest figure since 2008.

Jeremy Blackburn, RICS Head of Policy said “Many firms are currently having to bring construction professionals in from outside the UK. The lack of quantity surveyors consistently apparent in our survey is also underscored by the fact that, at the moment, under the government’s Shortage Occupation List, it is easier to employ a ballet dancer than a quantity surveyor.

“Even if we were to reverse this and also ensure that through Brexit we maintain access to EU workforce, we would still have a domestic shortfall of skills. The Industrial Strategy is a golden opportunity to align education, training and employer work paths – along with modern methods of construction – to ensure we have the skilled workforce to meet our building targets.”

Simon Rubinsohn, RICS Chief Economist, added “The latest results suggest that the construction sector has shrugged off concerns about the effect of Brexit with key workload indicators remaining firm around the country. Indeed, feedback regarding the outlook over the next twelve months is now rosier than it was back in the autumn with more building anticipated as 2017 unfolds.

“That said, there remains some unease about access to skilled labour in the emerging new world and financial constraints still remain a major challenge for many businesses. And significantly, we are being told that a shortage of quantity surveyors is impacting on the development process at the present time.”

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VIDEO: Crossrail’s quarterly update

Crossrail have released the latest video in their “Moving Ahead” series, which is issued four times a year to inform of how much progress has so far been made on what has been described as Europe’s largest construction project.

Construction work on Crossrail began in May 2009. Once completed, the Crossrail route will run over 100km from Reading and Heathrow in the west, through new tunnels under central London to Shenfield and Abbey Wood in the east.

Crossrail is considered to be among the most significant infrastructure projects ever undertaken in the UK. From improving journey times across London, to easing congestion and offering better connections, Crossrail say that their project will change the way people travel around the capital.

The total funding envelope made available to deliver Crossrail was a staggering £14.8bn, however, the new railway is expected support regeneration across the capital and add an estimated £42bn to the economy of the UK.

Watch the latest update below:

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Tougher building regulations required to protect future communities

We must stop building houses that are simply not covered or prepared for future flood events, warns Know Your Flood Risk’s Mary Dhonau OBE.

With the Environment, Food and Rural Affairs Committee’s (Efra) this week criticising Government for “missing opportunities to act on” Efra’s Future Flood Prevention report that was published in November, Mary Dhonau OBE, chief executive of the Know Your Flood Risk campaign has publicly responded to urge Government to “toughen up on building regulations” so that flood resilient measures are automatically included in all new-build properties that are deemed to be within a flood risk zone.

Following Efra’s formal response on what it calls a “disjointed flood management system”, Mary Dhonau said: “I think it is now a matter of urgency that the Government toughens up on its planning and building regulation processes to make sure that any new builds located in ‘at risk’ areas automatically include measures to make the property flood resilient.

My concern is that Flood Regulation does not cover new build properties and therefore we must stop building houses that are simply not covered or prepared for future flood events; it’s not fair on the future generations who will have to deal with the dreadful aftermath that flood waters bring.”

Landmark Information, the data partner for the Know Your Flood Risk campaign, has undertaken some cross-analysis of flood risk data from the Environment Agency (EA), Natural Resources Wales (NRW) and planning application data from Barbour ABI to determine the percentage of planning applications for new build properties (residential and commercial) that are deemed to be within an EA/NRW Flood Zone 3 (assessing sea or river flooding only), by county.

Between September 2015 and September 2016, 9 out of 10 new build applications in the City of Kingston upon Hull were deemed to be within an EA/NRW Flood Zone 3. This is followed by Thurrock in Essex at 48%, Casnewydd-Newport at 37% and North Somerset at 32%.

Adds Mary Dhonau: “Having reviewed the data analysis from Landmark, it is clear that there are hundreds of applications submitted each year that fall in to a designated flood risk zone according to the Environment Agency and Natural Resources Wales’ parameters. These stats don’t even take into account groundwater or surface water risks and so I fear the volume is greater still. I therefore agree with Efra’s call to Government to create far stronger planning rules, and penalties for those that breach them, to ensure future communities are not blighted by today’s failure to act.”

The Know Your Flood Risk Campaign’s mission is to raise awareness of the risk of flooding from all sources. It is a well-regarded online resource for helping people find out the flood risk related to their current or future home and provides access to free-to-download information guides and a smartphone app.

To download a free copy of the Homeowners’ Guide to Flood Resilience or the new supplement for businesses, visit www.knowyourfloodrisk.co.uk. For more information, follow the Know Your Flood Risk campaign on Twitter. For more information regarding Landmark Information Group, visit www.landmark.co.uk.

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VIDEO: Construction giants – amazing bridge building machine in action

This amazing video shows a giant machine called the SLJ900/32 building a bridge in China. The SLJ900/32 is built by the Beijing Wowjoint Machinery Company and is an impressive 91m long, 7m wide, 9m tall, and weights a staggering 580 tons. You can sense its size in the video below, when you see workers scale down it to begin work.

It’s lays new bridges one section at a time, progressing gradually across support girders. The behemoth of a machine is a perfect example of how China’s economy and construction industry is booming and requires giant feats of engineering to keep up with the growth.

https://www.youtube.com/watch?v=k0X9cECLsAM&t=78s

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Retail construction sees a decline in value but contract numbers hold steady

Even though the internet continues to eat into the share of retail spending (15% market share in October 2016), this has not detracted the industry from building in 2016, albeit showing a widespread trend towards smaller project contracts.

According to the ‘Does retail offer real opportunity?’ report from construction industry analysts Barbour ABI, the key change in work coming from the sector is that construction projects are smaller, fitting in with the emphasis that is being placed, especially by larger retailers, towards an nincrease in smaller, more local retail units.

Retail construction accounts for £4.7 billion pounds a year, down from the £8 billion pre-recession peak. The report also describes how physical stores are still pivotal to the strategies of most retailers, as major opportunities look to be available over the next few years, particularly for architects who can rethink retail space and develop nexus between the physical and digital shopping experience.

Across 2016, the twenty largest retail projects accounted for a value of more than £570 million, with £421 million coming from the South of England which is 74 per cent of the total. However, interestingly it was the North West of England that led all regions with the highest overall number of contracts in the retail sector over the 12 months to September (see fig 1.1).

The two largest projects by value in retail construction last year were the Charter Place shopping Arcade in Watford valued at £178 million and the £75 million O2 retail village outlet in London.

Commenting on the figures, Michael Dall, Lead Economist at Barbour ABI, said “Ultimately today’s retailer is looking to improve the experience of their customers. That has been reflected in how they design and use the buildings they occupy, which has ultimately resulted in smaller, more frequent projects, making up for the declining overall value of retail work over the past five years for the construction sector.”

“The value of work may have shrunk, but the number of projects being let by retail clients is holding steady, providing similar numbers of opportunities to impress clients.”

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70% of builders report material price hikes, report FMB

70% of UK builders have seen an increase in material prices due to the depreciation of the pound, new research from the Federation of Master Builders (FMB) has revealed.

Sarah McMonagle, Director of External Affairs at the FMB, said “thousands of smaller building firms are grappling with the rising cost of materials caused by the depreciation of sterling since the EU referendum. More than 70% of smaller building firms have experienced increased costs as a result of the weakened currency, with additional increases of 10 to 15% expected as the new year unfolds. Anecdotally, construction SMEs are already reporting an increase of 22% in Spanish slate and 20% increase in timber. A quarter of all materials used by the UK construction industry are imported – this is significant and underlines the vulnerability of the industry to sudden fluctuations in the strength of our currency. The combined pressure of higher material prices and the rising cost of skilled labour represents a serious challenge to builders.”

“What this means is that home owners could start to see the cost of their building projects increase. It also means that consumer choice may be reduced as some home owners face having to compromise on aspects of their project due to the fact that certain materials have become too expensive. There is also an added headache for the builder, as material price rises can come at short notice and if they are mid-project, the original costing is no longer accurate. This makes pricing jobs problematic and leads to construction SMEs having to cover themselves against sudden price swings. Some builders are attempting to mitigate this by introducing larger contingency funds when pricing for a job, or by stipulating in the contract that the overall contract price will change in the case of material price hikes, making client budgeting more tricky.”

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