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What Corbyn’s leaked draft manifesto says about construction

A few details from a draft version of Labour’s upcoming manifesto have been leaked. What does it say about construction, house building and infrastructure? Buildingspecifier.com investigates:

Energy

The leaked data highlights plans to bring parts of the energy industry into public ownership and introduce a local, socially owned energy firm in every area. Also introduce an “immediate emergency price cap” to make sure dual fuel bills stay below £1,000 a year.

Infrastructure

As well as nationalising the railways, Corbyn proposes to borrow £250bn to invest in infrastructure but stick to the fiscal credibility rule to balance day-to-day spending. He also plans to complete HS2 from London to Birmingham, Leeds, Manchester and Scotland.

Housebuilding

The draft includes a target for tackling the housing shortage, suggesting that we build 100,000 new council houses per year. Additionally, Labour would see the homes of disabled veterans insulated for free.

Skills

In a bid to tackle the skills gap without jeopardising the potential for attracting home-grown talent, the draft manifesto urges us to recognise the benefit that immigrants have brought to our industry but also introduces fair rules and reasonable management. Corbyn promises to work with employers that need to recruit from abroad but emphasises the need to prevent exploitation.

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Skills shortages remain key challenge to infrastructure delivery

Construction and infrastructure workload expectations continue to improve with respondents the most positive since the referendum, according to the latest Royal Institution of Chartered Surveyors (RICS) Construction and Infrastructure Market Survey, Q1 2017. The pace of growth has increased across all sectors pointing to a widespread improvement in the sector.

In Q1 2017 27% more respondents reported an increase in workloads, (up from +18% in Q4 2016). Expectations for the next 12 months also remain firmly positive particularly for activity levels although they have reduced slightly in case of profit margins.

The shortage of skilled labour persists in UK infrastructure and construction and is again widely cited by contributors as a factor potentially impacting the performance of businesses working in the industry.

Looking at the different sectors, 34% more respondents cited an increase in private housing output rather than a decrease, which puts it above the other sectors for the pace of growth once again; this has been the case since Q1 2013.

While the commercial sector saw the largest growth in workload for the quarter (compared with Q4 2016) with 31% more respondents seeing a rise, infrastructure workloads continue to grow steadily with the most significant increases in rail, road and energy categories.

These sectors are also viewed as the most promising sectors in infrastructure for the next 12 months. Breaking this down, 60% of respondents felt that repair and maintenance work of existing structures is the most needed type of investment in their area whilst 40% felt investment in new projects was necessary.

Growing skills shortages

As workloads increase, skill shortages are still sighted as a significant problem to the industry with 53% of respondents stating a shortage of skilled labour to be a key impediment to growth.

This is slightly up from 50% in the last quarter. In recent reports, the proportion of respondents noting skill shortages to be the major barrier to growth had come down slightly but the latest results along with surveyors’ comments suggest labour shortage pressure across the UK construction sector is intensifying once more.

Alongside this, 65% of respondents reported insufficient availability of quantity surveyors, with skill shortages in this area becoming increasingly prominent since 2012. The results also point to the quality of available workers (rather than simply the quantity) being the principle driver in skill shortages, with 67% of respondents taking this view.

Looking at this further, 59% of contributors feel that improved education pathways and training would the most effective policy response to alleviate labour supply pressures, whilst 31% of contributors feel direct government subsidisation of training would be the most effective.

Financial constraints and their impact

Meanwhile, financial constraints are still the most significant obstacle to growth with 70% of respondents citing this as an issue. Planning and regulation remains a significant impediment to growth with 61% of respondents citing this as an obstacle (up from 53% in Q4 2016).

At the same time, tender prices are expected rise in the next 12 months. Specifically, 69% more respondents believe tender prices will go up in the building sector (rather than fall). The expected increase in tender prices may signal rising costs and shrinking profit margins which is also reflected in the 12 month expectation of profit margins easing from +26% in Q4 2016 to +18% in Q1 2017.

Regionally all parts of the UK have observed an increase in pace of output growth in Q1, with the exception of Northern Ireland. The was due to the pace of growth slowing within the infrastructure, private industrials and public non-housing sectors. Output growth gathered the most pace in London and the South East where the net balance rose from +7% to +22%.

Jeff Matsu, RICS Senior Economist said “The mood music in the construction sector has improved in line with the better tone to macro data more generally. However the survey does highlight some key challenges that need to be addressed if government’s ambitious plans for housing and infrastructure, in particular, are to be met. Access to finance, alongside planning and skill shortages, both quality and quantity, remain big obstacles to delivery and though some plans are in place to address these issues, it remains to be seen whether they are sufficient to make a meaningful impact.”

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Heathrow moves to revolutionise UK construction industry

  • Heathrow to use £16bn expansion to push growth in off-site construction in UK
  • In a first for a major infrastructure project, Heathrow invites communities across Britain to showcase why their area should host one of four new off-site logistics hubs
  • New logistics hubs key to Heathrow’s plans to build as much off-site as possible, making the project more affordable and environmentally sustainable while driving growth across Britain
  • Research reveals growth in the sector could boost Britain’s construction industry by up to £15bn outside London by 2020 alone

In a shake-up of the UK construction industry, Heathrow announced it would use its £16bn expansion project to revolutionise the way Britain builds major infrastructure.

Heathrow CEO John Holland-Kaye announced that the airport would be making a major push to support more off-site construction in the UK as it begins to deliver its expansion plans for Britain – a move designed to boost productivity and help rebalance the economy. The announcement comes as new research from economic consultancy WPI Economics revealed growth in the sector could lead to a £15bn boost for the construction industry outside London by 2020 alone.

Speaking to council leaders and representatives from the construction industry, Heathrow kicked-off the hunt for four UK sites to host the new off-site logistics hubs which will help deliver its expansion programme and drive growth across Britain.

Heathrow’s new logistics hubs will pre-assemble components of the expanded airport before transporting them in consolidated loads to Heathrow. By not building everything on-site at one of the world’s busiest airports, the logistics hub will play a key role in supporting the project’s efficient delivery, will make the project more affordable and will reduce emissions by transporting assembled components to site in fewer lorries. The new logistics hubs will also spread the jobs created from the project across more communities in every corner of the UK.

While off-site construction has enjoyed some success in the construction of homes – reducing costs by up to 25% and speeding up project delivery by 30% – the approach has had a limited role supporting major infrastructure projects. With Heathrow expansion set to be one of Britain’s largest infrastructure projects, the airport is aiming to drive a step-change in Britain’s construction industry and give Britain a leading-edge in an untapped new sector that can then be leveraged to support other major projects around the world.

Heathrow CEO John Holland-Kaye said “The global construction industry is set to be worth £15 trillion by 2025 – that’s a huge prize that Britain deserves a bigger share of and Heathrow can help.

“We want to use Heathrow expansion to not only upgrade Britain’s infrastructure, but cultivate a new world-leading sector and drive growth across the whole country. Boosting off-site construction will help make expansion more affordable and environmentally friendly and give Britain a lasting legacy of expertise that it can sell around the world – helping Britain lead the pack in global construction.”

In a first for a major infrastructure project, Heathrow is inviting communities across Britain to showcase why their area is suitable to host one of the new logistics hubs. Suitable locations will have good connectivity, access to a relevant supply chain and strong local skills. Interested applicants should click here to register their interest and complete Expression of Interest questionnaire before 31st July 2017. All applications will be considered by Heathrow and a list of potential sites is expected to be announced later this year.

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Architects wanted for iconic HS2 station designs

The search for world-class architects, designers and developers to deliver four ambitious and iconic new HS2 stations has begun with the publication of contract opportunities for station designs and a development partner for London Euston.

The winning bidders will work with High Speed Two (HS2) Ltd to develop and refine the detailed plans for three brand new stations, at Birmingham Curzon Street, Birmingham Interchange and London’s Old Oak Common, as well as a major expansion of London Euston.

The stations will welcome tens of thousands of passengers every day from all over the UK, providing easy and accessible onward connections to local transport, airports and connecting rail services as well as step-free access from street to seat. In total more than 170,000 new jobs are expected to be created in the wider development areas surrounding the four stations.

A separate contest, will seek a Master Development Partner to advise on, and later take forward, development opportunities for new homes, offices and retail space above and around the revamped London Euston. The winner will work with HS2 Ltd, Network Rail, the station design contract winner and local authorities to deliver a unified plan to unlock the full potential of the area.

This comprehensive approach has the potential to deliver up to 21 hectares of development space as well as improving accessibility and creating new public and green spaces across the wider Euston site.

Welcoming the launch of the competition, Transport Minister Andrew Jones said “The search for design teams to produce plans for new stations and world-class amenities for London Euston, Old Oak Common, Birmingham Interchange and Birmingham Curzon Street stations is a major step towards making HS2 a catalyst for growth across the country. The winning bidders will need to ensure the stations provide the best possible customer experience. There are also huge opportunities for development near all the HS2 stations. HS2 Ltd is progressing its search for a partner to deliver new homes, shops and offices around Euston station once the core HS2 work is complete.

HS2 Ltd Commercial Director Beth West added “We’re looking for the brightest and the best from across the industry to help us deliver one of the most tangible legacies of the HS2 project – three brand new stations and a major expansion of London Euston.

“All four present unique challenges and opportunities for the winning bidders. Together we will deliver world-class designs that help unlock wider local regeneration opportunities and provide unparalleled levels of accessibility, ease and convenience for the travelling public.”

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Government’s rail improvements tops list of infrastructure-driven property development opportunities

  • 86% of UK property developers say investors are increasingly looking to capitalise on government’s £23 billion infrastructure spend
  • Rail, tram and underground schemes will provide the most attractive opportunities led by Crossrail and Crossrail 2
  • Amicus Property Finance has provided more than £1 billion of short term property loans

Nearly two-thirds (63%) of property investors rated new and upgraded rail and tram links as providing the most attractive real estate development opportunities from the government’s £23 billion infrastructure scheme over the next five years, according to a new study1 commissioned by Amicus Property Finance, the specialist short term property lender.

Improved road transport links (55%), local authority-sponsored urban regeneration schemes (48%) and airport upgrades (43%) were ranked second, third and fourth respectively among property investors in terms of the potential offered by developing adjacent sites.

Analysis of the government-backed projects on an individual basis shows that three-quarters (77%) of property developers ranked Crossrail and Crossrail 2 as offering the most potential for residential schemes, ahead of High Speed 2 (51%), Thameslink (47%) and superfast broadband (14%).2

According to the study, an overwhelming majority (86%) of UK property developers believe that their peers are increasingly looking to capitalise on opportunities generated by the new £23 billion government-backed infrastructure programme over the next five years.

Keith Aldridge, Founder & Managing Director at Amicus Property Finance, said “The government’s decision to invest in building new infrastructure and upgrading existing assets provides a tremendous opportunity for residential and commercial property developers and we can expect this to continue for many years to come.

“The longer term impact of this infrastructure programme on regenerating existing residential communities and creating new ones cannot be underestimated, particularly when combined with the government’s renewed commitment to addressing the country’s housing gap. We have already seen growing demand among developers seeking short term finance to fund infrastructure-related residential and commercial schemes.”

Amicus Property Finance’s research also revealed that Crossrail and Crossrail 2 as the highest ranked government infrastructure schemes for commercial property development (71%) followed by High Speed 2 (51%), Thameslink (47%) and Manchester Airport (24%).

Amicus Property Finance, part of Amicus Finance plc, the leading specialist financial services group, has seen a strong start to 2017 having provided more than £1 billion of short term property loans last year as it further expanded its customer base among brokers, professional landlords and developers seeking finance for residential and commercial real estate assets.

As part of its growth journey, Amicus Finance plc, which expects to receive its banking licence this year, opened an office in Manchester last year to significantly expand its presence across the North. The new Manchester office provides a regional hub for SME lending, working capital solutions and short term property loans.

Amicus has seen consistently strong funding from the Omni Secured Lending (OSL) Funds. Vintages I, II and III have provided more than £500m of institutional third-party funding to the business. During January and February 2017 alone Vintage III raised more than £200m of new institutional capital, which is being actively deployed to fund new lending activity.

From the list below of the ten largest government-backed infrastructure projects in the UK, which you believe will create the best property development and investment opportunities?
  The best residential property development and investment opportunities (%) The best commercial property development and investment opportunities (%)
Crossrail and Crossrail 2 (South East England, £16.8 billion investment) 77% 71%
High Speed 2 (London, Birmingham, the East Midlands, Leeds, Sheffield and Manchester, £2.75 billion investment) 59% 51%
Thameslink – Network Rail (South East England, £6 billion investment) 47% 47%
Superfast broadband rollout (Nationwide, £1 billion investment) 14% 10%
Manchester Airport Investment (Greater Manchester, £1 billion investment) 10% 24%
M1 improvements (Chesterfield to Leeds, £1.3 billion investment) 10% 10%
M42 improvements (The Midlands, £1.8 billion investment) 10% 10%
River Forth replacement crossing (Edinburgh to Fife, £1.3 billion investment) 4% 4%
Hinkley Point C (Somerset, Chinese investment of £6 billion investment) 4% 10%
Smart Meters implementation programme (Nationwide, £11 billion investment) 0% 4%

Amicus Property Finance’s property loan portfolio is currently made up of 85% residential properties and 15% commercial properties, with 70% located in London or the South East. Its loans are repaid, on average, in eight months and it typically lends between £50,000 and £7 million.

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Building of UK’s first grid-scale electricity storage facility imminent

Construction of the first grid-scale electricity storage facility to be built in Britain for more than 30 years could begin as early as 2018 following today’s granting of planning permission for the scheme.

Developer Snowdonia Pumped Hydro (SPH) has been given the go-ahead by the UK government to turn two abandoned slate quarries at Glyn Rhonwy near Llanberis in North Wales into water reservoirs that will store some 700 MWhs of electricity—sufficient to supply 200,000 homes with electricity for seven hours a day over a projected operational lifetime of 125 years or more.

The GBP 160m facility will use surplus electricity, for example from wind and solar sources, to pump water through an underground tunnel from the lower to the upper reservoir. When lack of wind or sunshine reduces renewable power output, or when fossil fuel generators fail to start, the water will flow back down the tunnel, spinning a turbine in an underground chamber to regenerate the stored electricity at a power output of 99.9 MW.

The only visible evidence of the pumped hydro storage facility will be a modest building on an industrial park, and two reservoirs contained by slate dams blending with existing slate tips, whose water levels silently rise and fall each day.

The UK currently has four pumped hydro storage sites, the youngest of which was built with taxpayers’ money more than 30 years ago. SPH is seeking private equity funds to build the Glyn Rhonwy scheme without public money.

Pumped hydro provides over 90% of the world’s electricity storage, and countries including the US, South Africa, Australia and China are among those expanding their national pumped hydro fleets as they seek to balance the intermittency of wind and solar.

In Britain it was thought that only a limited number of mountainous areas were suitable for pumped hydro sites, but SPH has shown energy civil servants how the UK could build some 50 GWh of pumped hydro storage using unconventional sites like ex-industrial quarries, coastal locations and existing drinking water reservoirs.

“There are signs that the government is taking storage seriously,” said SPH managing director Dave Holmes. “The National Infrastructure Commission last year urged swift action on storage, and a team inside the Department of Business, Energy and Industrial Strategy is looking urgently at how planning barriers and market disincentives to storage can be addressed. We see the grant of permission for our Glyn Rhonwy scheme as highly significant, signalling a real change that will enable the UK to meet carbon reduction targets, while keeping electricity supply secure and prices for consumers under control.”

Energy experts agree that as the percentage of intermittent renewable generation on Britain’s electricity grid continues to increase, a mix of storage types and technologies may be the optimum solution to ensure that electricity supply remains secure and affordable. These include long duration grid-scale storage such as pumped hydro, localised shorter duration storage provided by household or community batteries, complemented by demand reduction measures.

SPH has not sought to develop Lithium-ion batteries at grid-scale. Said Holmes. “Glyn Rhonwy can be expected to deliver around 32 million MWh over its lifetime. An equivalent 700 MWh Lithium-ion installation would deliver just 2.1million MWh before needing its batteries replacing. This means electricity delivered by pumped hydro is twenty times cheaper per MWh than Lithium-ion batteries over its lifetime, and carries less environmental baggage.”

The Glyn Rhonwy facility is expected to bring a significant economic boost to North Wales, supporting hundreds of jobs during the construction phase and creating up to 30 high quality full time local positions to operate the site for its 125 years or more service lifetime.

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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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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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Autumn statement: Something feels different

Statements from the Chancellor of the Exchequer aren’t always cause for celebration, but this one has left us feeling cautiously optimistic. Chris Coxon, Head of Marketing at Eurocell plc, takes a view.

Wrapped up as the National Productivity Investment Fund – £23bn between 2017 and 2021 – Chancellor Phillip Hammond’s Autumn Statement outlines investments in housing, transport, digital communications and R&D. Within that there’s a £2.3bn housing infrastructure fund, £1.4bn for affordable housing and £1.7m for accelerated construction to speed up house building on public land. This is obviously welcome because of the pressing issue of housing affordability.

If the Government can pump-prime supply then it would be hoped eventually that the improvements in meeting demand would reduce prices – at least at the ‘bottom’ end – and enable the next generation of home ownership.

(As an aside, one topic rarely discussed in respect of housing affordability is how much money large mortgage payments and high rents take out of the real economy, such payments vanishing into institutions and funds and not into the high street).

We will have to wait for the detail of policy in the expected Housing White Paper, to be published ‘shortly’, according to the Treasury. There have been strong hints that offsite construction will feature strongly.

Admittedly, we’ve been here before: construction is a cyclical affair. When skills shortages threaten, thoughts turn to factory-based production; call it prefab, offsite, modern methods of construction, pre-manufacture or flying factories. This would represent a radical departure from how building products currently arrive on site, and caution needs to be maintained if whole sectors of manufacture are not to be detrimentally impacted by this.

The difference this time – maybe – is that this Government understands that its ambitious housing targets will not be met without a sea-change in how housing is delivered and – here’s the important bit – that policy must drive a change. To achieve its targets of 200,00 builds (some say 250,000 to 300,000 are needed) per year, the current methodology has to be challenged and the regime appears to at least be mindful of that, if not quite yet offering solutions.

The exciting bit, for us, was news of the creation of industrial strategy challenge fund – loosely based on the US’s DARPA programme. The areas which the fund will focus on will be decided in due course, yet let’s hope it doesn’t get too hung up on ‘funky’ tech, and encompasses more prosaic sectors such as ours.

Chris Coxon

And there’s something for innovators in the tax regime too. As the statement said: “To ensure the UK tax system is strongly pro-innovation, the government will review the tax environment for R&D to look at ways to build on the introduction of the ‘above the line’ R&D tax credit to make the UK an even more competitive place to do R&D”.

Depending on how both these initiatives play out, it sounds like good news at the moment and the right words and actions from Government provide some reassurance that our investment in innovation today will bear fruit tomorrow.

 

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Only 15% think HS2 is worth the money

Following the news that the first major works contracts for High Speed 2 worth around £900m have been awarded to three consortia*, a survey conducted by the ITV Tonight programme into issues surrounding HS2 has found:

  • Only 15% feel that HS2 is worth £56bn
  • 58% don’t think it’s a price worth paying
  • 77% of people would prefer that the money was spent in other areas, like the NHS
  • Nearly three-quarters of people thought HS2 would lead to price rises for train tickets
  • 60% said they would not pay more to ride on HS2
  • 7% would be prepared to pay increased prices for the high speed line
  • 80% said they felt sympathy for people who may lose their homes to HS2, even though they may be compensated
  • 11% people thought the high speed rail link would benefit the majority of commuters
  • 23% are not aware that HS2 is being planned

Additionally, less than 20% of respondents thought they would use HS2 when built, and only a third of people feeling that HS2 will benefit the north.

Joe Rukin, Stop HS2 Campaign Manager responded “After six and a half years of trying to con people into thinking HS2 is a good idea, public support for this white elephant is at an all-time low. It’s clear the spin from Government isn’t working as not only do only 15% think it’ll be worth the money, they’ve also seen through the spin, with the vast majority thinking it won’t benefit commuters, it won’t benefit the north and it will lead to an increase in the cost of train tickets. Quite simply, no-one is buying the hype and it is time to cancel HS2 before it is too late.”

Penny Gaines, chair of Stop HS2 added “We have yet another survey that shows the British people don’t think HS2 is worth the £56 billion pound price tag. This is the same message as from numerous other surveys. People can see the downsides, they won’t use HS2 and they are worried that HS2 will mean increased fare prices on the trains they do use. With the Government’s intention that whoever gets the West Coast Main Line franchise will also run HS2 for the first few years, it is even more likely that conventional speed fares will go up.”

*North: LM JV (Laing O’Rourke Construction, J Murphy & Sons)
South: CS JV (Costain, Skanska Construction UK )
Central: Fusion JV (Morgan Sindall, BAM Nuttall, Ferrovial Agroman (UK)

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