Posts

Hold off reverse charge VAT until 2020, urges industry

A letter from 15 trade federations has been sent to Sajid Javid MP, the chancellor of the Exchequer, asking for the 1 October 2019 introduction of domestic reverse charge VAT to be delayed until April 2020.

Reverse charge VAT means that the customer receiving the service will have to pay the VAT to HMRC instead of paying the supplier. The reverse charge applies through the supply chain where payments are required to be reported through the Construction Industry Scheme. Making the payment of VAT the responsibility of the customer rather than the supplier, there is no opportunity for the supplier to avoid paying VAT.

The National Federation of Builders, together with the other trade federations, has highlighted the effect the change will have on cash flow and administration costs for an industry already facing increased material and labour costs.

The guidance issued by HMRC was delivered late, is not clear and leaves some questions unanswered. A delay before introducing the charge would give the industry and government time to properly prepare the industry to understand the changes and update systems.

Richard Beresford, chief executive of the National Federation of Builders, said “For an industry facing lighter workloads, increasing pressure on cash flow and an already high rate of insolvency, reverse charge VAT could not have come at a worse time. By delaying the introduction of this measure, the industry will have more time to properly prepare and make their businesses more resilient, and more detailed guidance can be provided to ensure a smooth introduction.”

/0 Comments/by

New Prime Minister must stimulate construction and house building

Construction leaders are calling on the new Prime Minister to intervene as construction output flatlines for the benefit of the wider economy as the latest statistics show that the sector is flatlining, says the Federation of Master Builders (FMB).

Commenting on the latest construction output statistics from the Office for National Statistics, which show that construction output growth in Great Britain was flat (0.0%) in the three-month on three-months to May 2019, Sarah McMonagle, Director of Communications at the FMB, said “Alarm bells will be ringing in the ears of the two candidates vying to be Prime Minister, with these latest stats showing that the construction sector is at a standstill. Whoever wins the race for PM, I want to see that person take decisive action in their first days in office by intervening to stimulate our waning sector, which is so vital to the health of the wider economy. Indeed, without it, our country’s house building aspirations will be impossible to deliver.”

“The poor performance of the construction sector over the past few months was driven partly by a drop in activity in the repair and maintenance sector. As you would expect, this part of the construction industry is particularly vulnerable to dips in consumer confidence, which the threat of a ‘no deal’ Brexit continues to perpetuate. There would be no better way to encourage homeowners to commission building projects in the second half of this year than by slashing VAT on housing repair, maintenance and improvement from 20 percent to 5 per cent. Furthermore, when we asked our members how the next PM could best prevent an economic downturn, almost 90 per cent felt this was the most effective way to achieve it.”

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), added “Boris the builder must build columns instead of writing them if he is to fix the housing crisis and restore the hope of home ownership to a generation. We will only reach the number of good quality homes we need, and at the rate we need them, if local house builders are freed up to build as many homes as the large house builders. We want to see Boris bring down the barriers facing construction SMEs, including those who repair and maintain our homes. If Boris is looking to cut taxes, then we suggest slashing VAT on home improvement works, as nine in ten builders believe this is the single best tool in Boris the builder’s toolkit to prevent an economic downturn post-Brexit. Bojo must restore the housing market’s mojo to ensure that Brexit Britain is built on strong foundations.”

/0 Comments/by

Spring statement: construction industry response

This week Chancellor Philip Hammond delivered his Spring statement to the chamber. Touching on key issues such as the housing crisis, skills shortages, Brexit, apprenticeships and planning reform, the latest budget included much for the construction sector to sit up and take note of.

Housebuilding in particular, was very much high on the agenda. The Chancellor has previously promised 300,000 new homes a year by mid-2020s. Will the range of measures signalled in the latest Budget be enough to achieve that ambitious target? Are enough steps being taken to address some of the key issues facing the construction industry?

Buildingspecifier.com catches up with thought leaders from across the sector to see what they have to say in response:

More costs and more delays will hamper house building – Brian Berry, FMB

According to the Federation of Master Builders (FMB), new biodiversity measures will result in more costs and more delays for the nation’s small and medium-sized (SME) house builders, worsening the housing crisis.

In response to the statement, Brian Berry, Chief Executive of the FMB, said “The Chancellor claimed to support housing delivery but actions speak louder than words and the burdensome and poorly thought-through biodiversity targets for developers will bring yet more costs and more delays for builders. Just as the environment for SME house builders starts to improve, these measures could end up stalling our progress. The Government wants to make developers, large and small, increase the biodiversity on their sites by a whopping 110 per cent and for an average site of ten units, the additional cost could be in excess of £2,000. Needless to say, this would also create delays to projects by adding additional hurdles for builders to negotiate during the already bureaucratic planning process.”

“Rather than hampering the building of new homes, if the Government wants to be ‘more green’, it should focus instead on retrofitting the more than 24 million homes that have already been built and which account for around one fifth of the UK’s greenhouse gas emissions. This will not only help reduce the UK’s carbon footprint but will also tackle the scourge of fuel poverty.”

We are likely to see an increase of regulatory measures in the industry, aimed at encouraging homes which are fit for the future – Neil Stewart, Glen Dimplex Heating and Ventilation

CEO of Glen Dimplex Heating and Ventilation, Neil Stewart said “The introduction of the Future Homes Standard for new builds is another positive move towards achieving net zero carbon dwellings in the future and ensuring UK homes benefit now from being highly efficient. The introduction of this new standard is in response to a legal commitment to the Energy Performance of Buildings Directive.

“Along with other legal requirements, such as carbon budgets, we are likely to see an increase of regulatory measures in the industry, aimed at encouraging homes which are fit for the future. As this could cause radical change for construction, industry bodies have been spending time analysing what this actually means and where changes need to happen to our current traditional techniques and processes.

“In February 2019 the Committee on Climate Change released their latest report on UK Housing: Fit for the future?, which suggests a required overhaul of how UK homes are supplied with energy. More recently the SEA’s response to how the Buildings Mission to halve energy use by 2030 can be achieved, highlights the need to future proof todays developments in readiness for the required changes.”

“As we transition to a low carbon, low energy future, we are likely to see a change in the HVAC strategies used in building design. This indicates an increase in the specification of renewable technologies, especially where dominant energy loads can be fulfilled in a  low carbon way. Heat pump technology provides a potential solution, supplying homes with the required energy through recent innovations which are transforming how this technology can be applied.”

Now is the time to invest in our people and our places – Lord Porter, LGA

Responding to the Spring Statement, Lord Porter, Chairman of the Local Government Association, commented: “The Government acted on our calls to find extra one-off funding for councils this year in the last Autumn Budget, including for social care, potholes and high streets. With councils still facing a funding gap of more than £3 billion in 2019/20, it is disappointing that the Chancellor has missed the opportunity to use today’s Spring Statement to provide further desperately-needed funding for our under-pressure local services this year.

“The money local government has to maintain the services our communities rely on is running out fast and huge uncertainty remains about how local services will be paid for into the next decade.

“Last year’s Autumn Budget was the earliest for a number of years but was still held at the end of October. The Government’s plan to publish the Spending Review alongside the Autumn Budget this year could exacerbate the funding challenges facing councils and will severely hamper their ability to plan ahead for next year and beyond. It is vital that the Government publishes the Spending Review much earlier and ensures it genuinely secures the financial sustainability of councils.

“Now is the time to invest in our people and our places.

“Brexit cannot be a distraction from the challenges facing our public services. If we truly value our local services then we have to be prepared to pay for them. Fully funding councils is the only way councils will be able to keep providing the services which matter to people’s lives, continue to lead their local areas, improve residents’ lives, reduce demand for public services, and save money for the taxpayer.”

We welcome the Chancellor’s £3bn affordable homes guarantee scheme to support the delivery of 30,000 new homes. – Terrie Alafat, CIH

Commenting on the Chancellor’s Spring statement, Terrie Alafat, chief executive of the Chartered Institute of Housing (CIH) said “We welcome the Chancellor’s £3bn affordable homes guarantee scheme to support the delivery of 30,000 new homes. A previous scheme that allowed the government to underwrite borrowing by housing associations to fund affordable housing delivery worked well, so it’s good news that it is coming back. We have always said this would be a sensible and positive move. We need to see the details of the scheme, but the key question is whether the homes being funded are genuinely affordable, especially considering that we need 90,000 new homes per year at the lowest social rent.”

The lack of affordable housing is now pushing hundreds of thousands of working families to the brink – James Prestwich, NHF

James Prestwich, Head of Policy at the National Housing Federation said “We welcome the announcement of a £3bn guarantee scheme, which we called for in the Autumn. It will help housing associations borrow more cheaply and therefore build more homes. However, whilst this is an important contribution, we desperately need new money in the next spending review to build more social housing.

This is more crucial than ever in the midst of Brexit uncertainty – the lack of affordable housing is now pushing hundreds of thousands of working families to the brink – the number is rising year on year, many are living in debt, at threat of eviction or homeless.

We need to build 145,000 affordable homes every year to house these people – this is not a one off investment, the government must commit billions of pound every year into building more social housing. We hope, as the Comprehensive Spending Review approaches, the government will see sense and commit the significant investment needed into social housing.”

/0 Comments/by

Industry must rise to meet UK economy growth

Industry must rise to meet UK economy growth

The UK’s economy had higher than expected growth in the three months to September, reveals the latest figures from the Office of National Statistics released today.

According to the ONS, gross domestic product (GDP) for the quarter rose by 0.4%, compared with 0.3% in each of 2017’s first two quarters.

Services and manufacturing industries grew during the period. Industrial production rose in July and August but construction output fell.

The financial markets are now indicating an 84% probability that rates will rise from their current record low of 0.25% when the Bank of England’s Monetary Policy Committee (MPC) meets on 2 November.

Construction is crucial

Construction output in the UK is currently more than £110 billion per annum and contributes 7% of GDP. Approximately 60% of construction output is new build, whilst 40% is refurbishment and maintenance.

The industry accounts for approximately 3 million jobs, 10% of total UK employment and includes both manufacturing and services.

Construction is a high cost, high risk, long-term activity, and so it’s performance is a good indicator of the health of the wider economy. When the economy falters, construction investment often grinds to a halt. However, today’s announcement suggests that our economy is beginning to recover after a tumultuous time post-Brexit. It is imperative that the construction industry recieves the support it needs from government to help continue this upward momentum.

What do you think the industry needs from Government? Let us know in the comments section below, or reach out to us on twitter @BuildSpecifier
/0 Comments/by

Improved access to material markets needed now to aid building

In a quarter characterised by political uncertainty, the Construction Products Association’s Construction Trade Survey shows that despite a strong Q2 the industry’s supply chain are more pessimistic for the year ahead.

The survey of main contractors, SME builders, civil engineering firms, product manufacturers and specialist contractors found that all reported increases in sales, output and workloads in the quarter driven by increased demand. Notably however, order books were sustained by private housing and R&M work, but fell in sectors such as commercial and industrial. This was echoed throughout the supply chain, with net balances weakening for enquiries, orders and expected sales among SMEs, civil engineering contractors and product manufacturers compared to Q1.

After Sterling’s depreciation since the EU Referendum, the strongest cost pressures for the construction industry have been rising prices for imported materials. On balance, 88% of main contractors, 87% of heavy side manufacturers and all light side manufacturers reported raw materials costs rose in Q2. In spite of this, almost half of main contractors and specialist contractors opted to keep tender prices unchanged, leading to a fall in margins.

Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said “This was the 17th consecutive quarter of growth for the construction industry, but a cautious stance over future expectations is not surprising. Another quarter of slow GDP growth, rising costs and a near-term outlook clouded by Brexit uncertainty have led to a fall in orders in privately-financed sectors such as commercial and industrial, and this pessimism has also spilled over into infrastructure.

“Perhaps more conspicuous in the survey data is the squeeze on margins for main contractors and specialist contractors. Strained margins had already been acute for some time given skills shortages pushing up construction wages. Now there’s the added pressure of contractors trying to avoid or delay passing on the full cost of higher raw materials prices to clients when tendering for upcoming construction projects.”

Brian Berry, Chief Executive of the Federation of Master Builders, said “Despite rising material prices and a period of political uncertainty, it is encouraging to see the SME construction sector continuing to grow. The industry is demonstrating significant resilience, especially when we consider difficulties in recruiting key trades such as bricklayers and carpenters, and shortages in other trades, such as plumbers and plasterers. Furthermore, there are real challenges ahead for the sector. The possibility of Brexit exacerbating already severe skills shortages and the continuing upward pressure on wages and salaries this brings, means construction SMEs will be cautious in their optimism”.

Richard Beresford, Chief Executive of the National Federation of Builders said “Although SMEs have found more work, project viability seems to be increasingly stifled by spiralling material costs. Construction SMEs are reporting a tightening of profit margins, which may impact productivity in the coming twelve months. The NFB’s house building members appear more confident about their immediate future, despite not having an assured work pipeline. The Government must enable constructors – particularity SMEs – to establish a pipeline of work either through more streamlined procurement or by reforming the planning process. However, the weakening pound shows that, in the long term, constructors either need improved access to material markets or short-term financing for project completions. The Government must deal with the impact of a weaker exchange rate and Brexit more urgently. It must work with industry to understand and navigate more unpredictable and potentially difficult times.”

/0 Comments/by

Hung parliament – Keep Calm and Carry On!

The results are in and Britain once again finds itself with a hung parliament. As uncertainty spreads like wildfire as to what this will mean, speculation runs rife regarding how it will affect the construction sector.

Regardless of whether we end up with a coalition government led by Theresa May or a minority government fronted by Jeremy Corbyn, there are bigger fish to fry in the long run! Buildingspecifier investigates:

Brexit

Brexit still looms over us as an industry, and whatever shape the new government takes, they will still need to ensure it happens as smoothly as possible. We need to continue to harness the potential for future infrastructure investment and economic growth, championing ourselves as bastions of innovation and construction prowess.

Although the snap General Election has added more uncertainty and speculation into British economy as a whole, as seen with fluctuations in the value of the pound, 2017 has been a tumultuous year politically. As a country and as an industry we have shown resilience to these challenges and risen to meet them. Let’s keep up the good work!

The election campaigns of all parties have focussed heavily on upcoming Brexit negotiations, and for the construction sector in particular a major priority has been to make sure we still have access to the wealth of skilled labour afforded to us by close ties with Europe.

From an economic perspective, market surveys across both residential and commercial sectors now reveal an overall acceptance of Brexit and people are now looking beyond and seeing the bigger picture. However, there is still ongoing concern about deferral of major investment and recruitment plans, which are understandable but likely to subside in coming weeks and months following on from the distraction of a dramatic election.

Skills

An inescapable truth is that there needs to be a drastic narrowing of the construction skills gap as soon as possible, and today’s result doesn’t negate this harsh fact. The new administration will undoubtedly continue to reinforce the importance of the construction industry to the country’s physical and economic wellbeing, and will need to continue implementing modern technologies such as offsite and modular into our projects nationwide, contributing to further growth of the UK economy by championing us an a lucrative opportunity for investors.

In summary

There is going to be a lot of confusion and insecurity following today’s result; it is vitally important that as an industry we do not lose sight of what we need to achieve as an industry. Today’s result doesn’t change this, it merely adds another dynamic that we will need to evolve and change in order to adapt to. We mustn’t allow procrastination, frustration or insecurity to unravel all of the good things we have achieved over the past few years. We must keep calm and carry on!

/0 Comments/by

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.

/0 Comments/by

General election: dividing opinion

The construction sectors are currently abuzz with discussion about the potential effects a General Election will have on our industry. With some seeing it as an opportunity to refocus strategy and others concerned the fallout will impact heavily on future investment, Theresa May’s announcement has certainly divided opinion.

Carolyn Fairbairn, Director-General at the Confederation of British Industry (CBI) said “With a snap General Election now called, businesses will be looking to each political party to set out their plans to support economic stability and prosperity over the next Parliament in a way that is fair and sustainable for communities across the UK. Distraction from the urgent priorities of seeking the best EU deal and improving UK productivity must be kept to a minimum.

“It is essential to get the UK’s foundations right, from building a skills base for the next generation, to investing in infrastructure, energy and delivering a pro-enterprise tax environment.
“Whoever forms the next Government, they should seek to build a partnership between business and government that is the best in the world, based on trust and shared interest.”

Lewis Johnston, RICS Parliamentary Affairs Manager said “Since the EU referendum last summer, our market surveys across the residential, commercial and construction sectors show we have largely moved on from initial negative reactions but uncertainty continues to cloud the outlook and weigh on market sentiment. Today’s decision does very little to change that prognosis in the near term, and if anything we are likely to see continuing deferral of major investment and hiring plans.

“Whilst Theresa May’s stated intention this morning was to provide greater clarity and stability by calling a general election, in the immediate term the move inevitably puts a question mark over policy and creates further uncertainty across the built environment. It is now the responsibility of all parties to set out clear policy proposals across land, property, construction and infrastructure to ensure the UK can deliver the homes, infrastructure, factories, offices and major building projects it needs to thrive.”

/0 Comments/by

Hold fire on Parliament restoration, urges Treasury Committee

The House of Commons Treasury committee have urged that they be permitted to complete their own enquiry before any decision is made on the refurbishment of the Palace of Westminster.

The Restoration and Renewal of the Palace of Westminster is likely to be one of the largest major restorations in the history of the public sector estate. The consultants have estimated that the cost, if carried out over the minimum period of 5-8 years, will be between £3.5 and £4 billion.

Rt Hon. Andrew Tyrie MP, Chairman of the Treasury Committee, said “This is one of the largest major restorations in the history of the public sector. Apparently, it is likely to cost at least £3.5 billion over 5-8 years.

“This can only be justified to taxpayers if Parliament and the public see the evidence required to make an informed decision.

      Read more: Radical concept for temporary floating Parliament unveiled

“The Committee’s inquiry into this hugely expensive project will challenge and assess the work and conclusions of the existing reports.

“Until such work has been carried out, it would be imprudent for Parliament to commit to a specific option.”

What work needs to be carried out?

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

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

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

The cost

So now at the crux of the issue, how much does it cost to renovate a 150 year old Grade I listed building which is partly sinking, contains asbestos and has outdated cabling? The short answer is ‘a lot.’ The sheer amount of work and the sensitive nature of refurbishing a World Heritage Site results in a sky-high estimate of between £3.5bn and £5.7bn, with some suggesting the sum could rise to as much as £7.1bn.

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

Whatever you stance, the Houses of Parliament are of national, historical and cultural importance and refurbishment will happen. It should therefore be imperative that efforts are made to soften the bludgeoning blow to the taxpayer’s pocket, shouldn’t it?

/0 Comments/by

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.
/0 Comments/by