January's resilient output figures indicate the sector's recovery is back on track and investor confidence is returning

CONSTRUCTION

• The Department for Business, Energy and Industrial Strategy (BEIS) has launched two consultations seeking industry input into increasing the sustainability of non-residential buildings. The first centres on the introduction of a performance-based rating framework for the energy and carbon performance of large commercial and industrial buildings (above 1,000m²) with annual ratings and mandatory disclosures. The second is exploring how to improve the implementation and enforcement of the non-residential private rented sector minimum energy efficiency standards. Combined, these policies cover 80% of energy use, and associated carbon emissions, from the commercial and industrial buildings stock.
• The ONS’ UK construction output figures show that ‘All Work’ output rose by 0.9% in January following a 2.9% dip in the previous month. However, the level of construction output in January 2021 was still 3% lower than it was in the same month one year earlier. Driving January’s month-on-month rise was new work, which grew by 1.7% fuelled by strong demand for private commercial and infrastructure work. Repair and maintenance output fell by 0.4%, driven by a 4.7% fall in private housing R&M work. January’s resilient output figures indicate that the sector’s recovery is back on track and investor confidence is returning.

• Of the 8,000+ firms that fell into liquidation in the 10 months between March 2020 and January 2021, 1,634 of these operated in the construction sector. This figure, ascertained by Insolvency specialist Business Rescue Expert using data from the ONS and Insolvency Service, is higher than those in both the hospitality and retail sectors – two industries which were previously thought to have fared worse during the pandemic. It is thought that the halting of projects, both large and small, damaged the construction industry over the period but with Government measures to keep firms afloat due to end in the coming months, 2021 could see further business collapses.
• The CLC has said that its three core priorities for 2021 will be the industry’s ongoing recovery from the COVID-19 pandemic, helping it transform and build trust by improving the industry’s reputation. In its Strategy 2021 publication, the group wishes to build a “more capable and resilient industry that can deliver the UK’s ambitious and sustainable investment agenda” saying that it will push for change by accelerating the adoption of new technologies, business processes and skills to meet the Government’s Build Back Better initiative. It also wants to ensure that the industry has the capability, culture and business processes to gain the confidence of investors and the public.
• Mark Allan, chief executive of Landsec, has said that some existing office spaces could become rapidly obsolete or unfit for use post-COVID. Speaking at Mipim on the future of real estate, Allan said that an overhaul in post-COVID office requirements “could yield opportunities for redeveloping and reimagining of how our urban spaces and workplaces exist”. He noted that recently developed, grade A office space will be best placed to adapt and change to “whatever the requirements of occupiers are going forward,” but that secondary office space will be “much less well-suited” to adjusting to the change.
• The Building Safety Regulator (BSR), a new department that was set up following the 2018 Hackitt report into Grenfell, has begun a recruitment drive for 700 staff that will help oversee the safety of tall residential buildings. Project managers, HR professionals, as well as people with technical experience and building control skills are being sought to help develop the BSR’s systems and deliver its functions. The BSR will oversee the drafting of new building regulations and will ensure that the industry complies with them. It will also check that high-rise residential buildings are safe on handover and during occupation.

CONTRACTOR NEWS

• Despite revenue falling 30% in 2020, M&E contractor T Clarke managed to stay in the black with a pre-tax profit of £1.2m. Revenue in its London division fell from £201m to £134.6m in 2020 which it blamed on site closures while safe working protocols were introduced. The firm has set itself a revenue target of £500m within three years, noting that it has so far secured £288m of work for 2021 and £168m for 2022 and beyond in its forward order book.
• Mace has told the Government that setting up six regional modern methods of construction (MMC) hubs would speed up its plans for levelling up the UK economy. Mace said that setting up faster and more innovative production style approaches in construction could produce annual savings of £2.8bn – enough to triple the investment going into the North West region every year or increase tenfold the amount being spent on the East Midlands. The hubs would provide a regional economic boost, creating 124,000 jobs in regions that have suffered from under-investment while supporting the delivery of social and transport infrastructure.
• TfL has been given the green light to build a 17-storey hybrid CLT tower above Southwark tube station in South London. Providing 200,000 sq ft (NIA) commercial office space, 3,208 sq ft of retail space and 12,292 sq ft of cultural affordable office space, the development has been designed to be one of the greenest and healthiest large-scale commercial buildings in the UK. The development will achieve industry-leading embodied carbon reductions of over 40%. The 100% electric building will be heated by next-generation air source heat pumps and will include solar panels, a lightweight responsive façade to minimise solar glare and reduce cooling loads and high-performance building materials. The development, which is expected to complete in the mid-2020s, is targeting the highest BREEAM accreditation of ‘Outstanding’ and also WELL Platinum. G&T is providing Employer’s Agent, Project Management and Cost Consultant services on the scheme.
• Balfour Beatty is trialing a new BIM tool that can measure embodied carbon in construction materials and products and help fine-tune the design of low carbon buildings. On live project trials the tool (called the ‘AutoBIM Carbon Calculator’) has helped make potential savings of up to 14% in embodied carbon through more informed design choices. The platform allows designers to compare products and materials, provide alternative solutions and ultimately help those involved make informed, low carbon decisions. Developed in collaboration with leading industry experts, Balfour Beatty strategic improvement project manager Rachel Sudlow, said:

• Panattoni, the largest industrial developer in Europe, has engaged sheds & beds specialist Winvic Construction to build speculative warehousing at three separate locations: Derby, Crewe and Northampton. Winvic has also been awarded a contract to build a global parts logistics centre for Jaguar Land Rover in Leicestershire. The centre will comprise five steel-frame warehouses totalling 2.94 million sq ft, making it the UK’s largest single occupier logistics park and Winvic’s largest industrial facility to date.

MATERIALS & COMMODITIES

• The ‘All Work’ construction material price index rose by 5.5% in the year to January 2021, driven by soaring prices for aggregates (up 19.2%), imported timber (13.8%), fabricated structural steel (13.5%) and rebar (14.9%). British Steel recently hiked the price of structural steel for the sixth time since July 2020 which has risen by more than £260 a tonne since then. The speed of the rise is unprecedented and has been blamed on sharp rises in raw material costs, quotas and scrap availability. Contractors are concerned about the impact on project costs, especially those operating on thin margins. Many have also reported increased supply lead times which, for steel decking, have moved to 12 weeks.
• The UK Government has asked the Construction Leadership Council (CLC) to keep tabs on materials shortages on products such as timber and tiles, where demand is outstripping supply. In early March the Timber Trade Federation reported that its members were experiencing logistics difficulties amid record demand. A lack of haulage vehicles, inflated costs and problems with post-Brexit trade requirements was slowing down trade among UK timber firms, it added. A product availability working group has been established by the CLC to monitor the supply and demand of products and identify those in short supply.

UK ECONOMY

• UK CPI dropped to 0.4% in February, far below a poll of City economists who expected inflation to rise marginally from 0.7% last month to 0.8%. Only a rise in the cost of petrol and diesel, which sent transport costs higher, prevented inflation falling further towards zero, Economists (including the Bank of England’s chief economist, Andy Haldane) expect a steep increase in consumer spending and for inflation to rise later in the year once lockdown ends and all non-essential shops and the hospitality, leisure and travel industries reopen for business.
• UK service sector activity outpaced manufacturing in March for the first time since the start of the pandemic according to the latest flash composite purchasing managers’ index published by IHS Markit/CIPS. Business activity recovered as orders flowed in ahead of the easing of lockdown rules. The flash services sub-index accordingly rose to a seven-month high of 56.8 while the manufacturing index stood at a three-month high of 55.6. The expansion was driven by a surge in new orders, with service providers receiving advance bookings from consumers. Businesses also said they were hiring in order to rebuild their capacity.
• The UK labour market appears to have stabilised with the unemployment rate standing at 5% in the three months to January 2021. The rate was 0.1% lower than the previous three-month period (Oct-Dec 2020) and was also lower than the 5.2% that economists had expected. HMRC data also showed the number of employees on payrolls increased for a third consecutive month in February but the figure remained almost 700,000 lower than a year earlier. Unemployment could temporarily fall in the next few months before rising once the furlough scheme ends.

GLOBAL ECONOMY

• The ONS has said that tax data analysis has revealed that the number of EU citizens leaving the UK is perhaps half that previously thought by some commentators. The number of EU employees on UK companies’ payrolls (therefore not covering the self-employed workforce) stood at 2.3m in Q4 2020, 184,000 less than a year earlier and a drop of 7.4%. Data also indicated a shift in the foreign population from Europeans to other (non-EU) nationalities. Figures also confirmed that London has been the hardest hit with a steep fall of 10.6% in the number of EU employees and saw the only regional decline in non-EU employees.
• Private sector economists have cut their growth forecasts for the Eurozone economy as a third wave of COVID-19 infections and vaccine supply issues spur tighter restrictions. Lower growth expectations are in contrast to the brightening outlook for the US and much of the global economy as the assumption of a gradual easing of lockdown measures in Europe is called into question. Holger Schmieding, chief economist at Berenberg, said each month in lockdown would shave 0.3 percentage points off Eurozone growth.