Mrb 3Rd Dec

Market Research Bulletin: Latest findings from the Deloitte Winter Crane Survey

CONSTRUCTION

  • The latest data published by the Ministry of Housing, Communities and Local Government shows a 22% increase in the number of affordable homes delivered in England in 2018/19 to 57,485 compared to 2017/18. However, completions for social rented accommodation fell 6% to 6,287 units over the past year despite the increasing pressure on Local Authorities to deliver at scale and pace:
Affordable Homes

Mark Robinson, chief executive of Scape Group said that whilst overall affordable housing provision is up, there are significant differences in the tenure of housing being delivered. He said:

“Social rented homes are not being delivered at the scale and pace the country needs.”

MARK ROBINSON, SCAPE GROUP
  • ONS data has revealed a record spend of £351m on research and development in the UK construction sector. Total spend rose by 9.7% (£31m) in 2018 compared to the previous year, helped by modern methods of construction soaking up high levels of investment and resource as the country seeks to become a world leader in offsite construction.
  • Crossrail admits that it will miss its planned start date for trial running as the software systems required will not be ready until May or June 2020. Previous management had estimated it would take 8-9 weeks for testing when in reality it is likely to take nine to 12 months. Mark Wild, chief executive of Crossrail, said that services would begin "as soon as practically possible in 2021".
  • Fintech firm Propertunity has found that Help to Buy loans have been used on more than 20% of new-build sales across the capital since 2013. In Barking and Dagenham nearly two-thirds (61.7%) of new-build homes were sold using the scheme whereas Kensington and Chelsea recorded only 14 loans since 2013, or 1.1% of all new-build sales. However, Help to Buy as a proportion of total sales and transactions since 2013, not just new builds, made up a much smaller proportion – only 2.6% of total London sales.
  • A collaborative effort between BAM Nuttall and construction technology business Converge has culminated in the development of a new artificial intelligence (AI) system that can be used for predicting concrete strength. The strength prediction engine, which is already being used on BAM’s London City Airport expansion project, combines local weather data, a database of historical concrete curing data, and the concrete monitoring platform’s real-time measurements from the pour. This gives Converge the ability to predict the time the concrete will take to reach strength with an accuracy of +/- 5%, several days in advance. Developers at Converge say:

“The result of this immense predictive power is that teams can plan to act precisely when needed...This improved productivity keeps projects on track and, ultimately, can save millions of pounds.”

  • Deloitte’s recently published London Office Crane Survey (Winter 2019) found that only 24 new office schemes began across the capital between April and September 2019 – down 46% from the previous six-monthly survey. Construction in the city declined once again but the West End saw a surge in activity with 11 new starts. As at the end of September, 11.9 million sq ft of office space was under construction in London - down 10% from the previous survey but above the long-term average of 10.6m sq ft. Mike Cracknell, director at Deloitte Real Estate said:

“Today’s survey follows a three-year high of new construction starts, so these figures indicate a rebalancing of office development, rather than a worrying decline.”

MIKE CRACKNELL, DELOITTE REAL ESTATE


UK ECONOMY

  • A flash PMI estimate produced by IHS Markit/CIPS that combines both the services and manufacturing sectors found that UK private sector activity deteriorated the most in three years in November 2019. Uncertainty surrounding the general election and Brexit has hurt domestic demand and exports. The manufacturing sector also experienced a reversal of stock building since the passing of the 31st October Brexit deadline.
  • UK government borrowing rose to its highest level in five years in October, with public sector net borrowing rising to £11.2bn – the highest figure for the month since 2014. The figures provide a sobering backdrop to the recent manifesto launches, in which all the major political parties have pledged to increase public spending if they win the general election.
  • UK retailers experienced stronger-than-expected improvement in sales in November. The CBI said that its monthly index of reported sales rose to -3 in November from October’s -10, higher than all forecasts in a Reuters poll of economists and the strongest reading since April 2019. Retailers expect sales will grow over the festive season.
  • According to PwC, Britain could boost its economy by £83bn if regional productivity gaps were just halved. If the 10 most under-performing regions could each make up just half their productivity gaps with average UK productivity, then UK GDP would be 4% larger, according to PwC. Only London and the South East outperform the national productivity average, with Wales, the East Midlands and Yorkshire and the Humber the lowest-productivity areas.


WORLD NEWS

  • According to the OECD’s latest Economic Outlook, trade conflict, weak business investment and persistent political uncertainty are weighing on the world economy and raising the risk of long-term stagnation. The organisation trimmed its forecast for global economic growth to 2.9% for 2019 and called on governments to address challenges such as too little investment in long-term infrastructure projects and a lack of direction on climate policy, which is holding back business investment. The OECD urged governments to bring about change through policy-led initiatives rather than waiting for a cyclical upswing.
  • Global trade contracted by 1.3% in September compared to the previous month according to data from the CPB World Trade Monitor. The fall reverses the gains made in the previous two months, which had raised expectations that the worst of the disruption caused by the global trade war has passed. The US and China provided the largest drag on international trade volumes.
  • In her first big policy speech since replacing Mario Draghi as European Central Bank president on 1st November, Christine Lagarde has called on European governments to boost public investment and increase harmonisation in key markets in order to rebalance the region’s economy away from exports to domestic demand. She went on to say that Europe had a “moment of opportunity” to tackle the challenges presented by trade tensions and technological disruption.
  • The UN has said that countries will have to increase their carbon-cutting ambitions fivefold if the world is to avoid warming by more than 1.5C. Its annual emissions report found that even if all current commitments are met, the world will experience warming by more than double that amount by 2100. In its assessment it says:

“Countries collectively failed to stop the growth in global greenhouse gas emissions, meaning that deeper and faster cuts are now required.”


COMMODITIES & MATERIALS

  • Researchers at De Montfort University have created a super-insulating house brick made out of domestic plastic waste such as plastic bottles. The brick has been made using 3D printing and lattice architecture technologies, with criss-crossing strips of recycled plastic to form a weave. The plastic brick exhibits a tremendous thermal envelope, and lab tests show that it provides 10-times better insulation than traditional bricks made from clay. Apart from being thermally superior, additional benefits include a reduced carbon footprint and a lower weight.
  • Construction materials supplier Brickability defied industry trends in its first half-year results since listing on AIM in August. The firm experienced growth across all of its three business divisions: Bricks, Heating Plumbing and Joinery (HPJ), and Roofing. Chairman John Richards commented that a slowdown in London and the south East had been reflected in the group’s dispatches of its products. Outside of this region, however, in areas including the Midlands and the North West, dispatches “remain very, very robust.”
  • Skanska is in talks with Connect Plus (who manage the London orbital motorway for highways England) to use fully recyclable, graphene-enhanced asphalt on the M25. Skanska recently laid the material on a busy main road in Curbridge, Oxfordshire, saying that the new material will be assessed and monitored. Skanska operations director Jim Daughton said:

“Exploring these new materials is about taking a new approach to tackling two of the biggest issues facing the highways industry and UK drivers – reducing potholes and improving the quality of our infrastructure for the future while driving down carbon.”

JIM DAUGHTON, SKANSKA


ANNOUNCEMENTS IN THE CONSTRUCTION PRESS

  • Mace has issued a ‘Manifesto for Construction and the Built Environment’, outlining nine key areas where firm commitments from the political parties could help unlock productivity and drive change across the sector. Practical policy interventions include how to help the construction sector hit Net Zero by 2050, how to boost infrastructure delivery and how to reform procurement practices and the planning system.
  • Planning consent has been given to build London’s second tallest skyscraper. The City of London Corporation has given permission to knock down the Aviva tower and build 1 Undershaft (or ‘The Trellis’) in its place. The new tower will be 305m tall (73 storeys) and will include retail space at the ground and lower ground levels and a publicly accessible viewing gallery at level 71-72 with a restaurant at level 70. The site owner now has five years to start the development and must adhere to nearly 50 planning conditions including the requirement for a post-construction BREEAM assessment with a rating of 'Excellent'.
  • Countryside has set a target to build 1,400 modular homes in 2020. After its modular panel factory became operational in March of this year the firm delivered 376 homes in its first six months but said that it is on course for four times that number in 2020 by adding a second shift. Countryside invested in the facility in response to difficulties recruiting enough site labour.
  • Legal & General has partnered with 14 housing associations and providers to help reach their target of building 3,000 affordable homes annually in the UK by 2022. The news comes as official figures show a 22% rise in the number of affordable homes delivered in England in the past year. G&T is providing Cost Management Services on the schemes.
  • Bouygues UK has decided to close its operations in the North-west and the Midlands, citing a “challenging construction market” in those regions. The firm will close its Manchester and Birmingham offices with staff being redeployed where possible, but the move is likely to lead to job losses. A spokesperson for Bouygues said:

“This will happen over time and existing projects in the Midlands and North-west will continue unaffected through to completion.”

  • Kier, Bam and Morgan Sindall have won places on all 20 lots of the new £8bn Procure Partnerships national framework. The public sector framework covers two value bands in each of the 10 regions of England and Wales – projects worth between £4m and £12m and a second for jobs over £12m – making 20 lots in total.

If you have any questions or have some news/information to contribute to the bulletin, please contact Michael Urie, or Nick Rowe