Optimism grows over future workloads: RIBA Future Trends Workload Index highest since May 2016

CONSTRUCTION

• The RIBA Future Trends Workload Index (which provides predictions from architects for overall workload levels for the next three months) rose to +29 in March 2021 – up from +17 in February and reaching its highest level since May 2016. Forty per cent of practices expect workloads to grow in the coming three months, whilst just under half (49%) expect them to remain the same. The percentage expecting workloads to decrease has fallen again and now stands at 11% (compared to 84% a year ago). Optimism about future workloads continues to be drivenco by the private housing sector, although the outlook for all sectors is improved from last month.

• Construction output across the whole industry grew by 1.6% in February 2021 – the biggest month-on-month increase since September 2020 when output grew by 1.8%. All sectors (other than infrastructure and public housing R&M) saw positive monthly growth with both new work and repair and maintenance contributing positively overall to output growth. While ‘All Work’ output is still 4.3% (£598m) below the February 2020 pre-pandemic level there is optimism that good progress is being made on the roadmap out of the pandemic and that the sector will maintain its recovery following last year’s downturn and annual 14% decline in output.
• According to the latest ONS data, UK construction job vacancies in the three-month period between January-March 2021 edged higher after dipping slightly in the December-February period. Vacancies were 7.7% higher than they were in the same period one year ago and were nearly 34% higher than the 10-year average of 21,000. The recovery profile for construction job vacancies has closely tracked a similar v-shaped recovery in average weekly earnings (which have grown by more than 14% between May 2020 and February 2021). April’s PMI survey suggested that new project starts have spurred a solid rise in employment numbers, noting that the rate of job creation was the strongest in over two years in March 2021.

• At last week’s NBS Construction Leaders’ Summit construction minister Anne-Marie Trevelyan threw Government support behind plans to share quarterly data on the progress of net zero carbon. Trevelyan said that she supported the CLC initiative, known as ‘CO2nstruct Zero’, and asked for the industry’s input:

At the Summit, Trevelyan also said that the new Building Safety Bill which will overhaul the industry’s regulatory framework will come into force “not before too long” and said that it will be introduced to parliament “once government has fully considered the recommendations of the [Ministry of Housing, Communities and Local Government] committee in its scrutiny of the draft bill”.

• The IHS Markit/ CIPS UK PMI expanded at its sharpest pace since September 2014, registering 67.1 in March. All major categories of construction activity grew month-on-month but the strong rise in commercial activity was particularly impressive with the sector experiencing the fastest rise in work for six-and-a-half years. The survey’s Input Prices Index pointed to yet another significant rise in input price inflation as suppliers hiked prices, citing both Brexit and COVID-19 as the reasons. Higher prices for steel, timber and purchases for residential building projects were the most commonly reported sources of overall input cost inflation for the month.

• New London Architecture’s (NLA) 2021 Tall Buildings Survey found that planning applications for tall buildings in London fell by nearly one-third last year. Work started on just 24 buildings (of 20 storeys or more) – down from 44 in 2019. Planning applications for tall buildings fell by 27% overall (from 107 in 2019 to 78 in 2020) with the vast majority of proposals submitted during the second half of 2020. This suggests that after the initial economic shock of the pandemic and fears that it would perhaps trigger a profound economic collapse or a permanent shift in demographics, developer confidence has rebounded. Currently, nearly nine in every ten tall buildings in the capitals pipeline of 587 is residential – a clear sign that the capital is embracing new residential towers to keep up with demand and new London Plan targets.
• The Construction Products Association’s (CPA) spring forecast predicts that construction output will grow by 12.9% in 2021 and 5.2% the following year. This year’s growth figure has been revised down from the previous forecast of 14% while 2022’s forecast has been revised up (previously 4.9%). The infrastructure sector is expected to see the greatest level of output growth (29.3%) while the body forecasts that commercial activity will be 10.5% lower by the end of 2023 than in 2019. The CPA’s economic director Noble Francis suggested that, "...the recovery in commercial is expected to be muted given a lack of major investment in new projects, particularly in central London." He added:

CLIENT & CONTRACTOR NEWS

• Mark Allan, CEO of Landsec, believes London and particularly the West End will bounce back following the challenges of the COVID-19 pandemic. Highlighting the company's commitment to the city with projects such as Lucent W1 and The Forge in Southwark, Landsec is focusing efforts on sustainability which Allan believes will be the driving force behind successful post-pandemic offices. The Forge is one of the first commercial schemes to take an off-site approach and uses a platform system, known as P-DfMA (Platform for Design, Manufacture and Assembly) instead of using traditional construction methods. Allan notes that they have taken this approach to achieve net zero carbon procurement and put efficiencies back into the supply chain. To find out more about The Forge see our latest ‘Building the Case for Net Zero’ article.
• Laing O’Rourke has announced targets to decarbonise its operations by 2030 and hire equal numbers of men and women among its global workforce by 2033. The firm said it will reduce carbon emissions by at least 75% by the end of the decade with the remaining 25% being cut through carbon removal activities or offsetting. To do this, it has pledged to transition to biofuels as a stepping stone to full electrification of operation. Three projects are already underway - conversion of all company office and project sites to renewable energy tariffs, transitioning to an all-electric vehicle car fleet and investing in solar panels to power operations at its MMA factory in Nottinghamshire.
• Hammerson has signed a deal to sell seven retail parks to Canadian private equity firm Brookfield for £330m - an 8% discount to the 31 December book value of £357m. The portfolio includes retail parks in Falkirk, Didcot, Middlesbrough, St Helens, Telford, Merthyr Tydfil and Rugby in a deal that completes Hammerson’s exit from the struggling retail park sector. The sale will help shore up the firm’s finances as the commercial landlord has been struggling under a £2.2bn debt pile after seeing rental income from stores located in its shopping centres and retail parks tumble due to the pandemic. The potential sale comes despite retail parks performing better than its shopping centres, with Hammerson collecting 64% of its rent due at retail parks compared with just 36% at its UK shopping centres.
• The City of London Corporation plans to convert offices left vacant after the pandemic into hundreds of new homes as part of its five-year recovery strategy. The Corporation has set a target of adding at least 1,500 new residential units by 2030 through a mixture of developing new schemes and converting existing buildings. It has also proposed bringing in “high-potential tech-led businesses” not traditionally attracted to the City by offering low-cost, long-term leases in empty buildings. It will also encourage landlords to offer more flexible and adaptable offices suited to the post-pandemic workforce.

MATERIAL & COMMODITIES

• The CPA has warned of material shortages after a record number of firms reported price hikes. Ongoing supply chain disruptions due to a lack of available shipping containers and reduced staff at ports is likely to act as a constraint on supplies for the next 12 months. The CPA’s latest ‘State of Trade’ survey revealed that 97% of firms dealing on heavy side products (eg steel, timber and concrete) expect cost pressures to remain high over the coming year. Around 92% of firms dealing in light side products (eg glass, insulation and fit-out materials) are also anticipating rising costs.
• UK consulting engineer Arup has partnered with Madaster, an online platform intended to make construction materials part of the circular economy, so that they can be reused at the end of their life. Madaster has created a “material passport” for building elements which provides details on the products quality, origin, and location of the material in the building, as well as information about how it can be reused. The resulting materials databases can help unlock the transition to a more circular construction economy. Jan Wurm, Arup Europe’s research and innovation leader, said:

UK ECONOMY

• Consensus Economics – a company that averages economic growth forecasts – shows that economists are raising their forecasts for UK growth in 2021. Leading economists now expect the economy to grow 5.4% this year, much stronger than the 4.2% expected in February. The consensus rate of output growth would be the fastest pace since 1989 as the economy rebounds from the largest fall in output in more than 300 years in 2020. A “considerable upgrade” is also expected in the Bank of England GDP growth projections when it publishes its monetary policy report next week. Greater optimism over the UK’s growth prospects stems from the substantial government support in the March budget, the rapid vaccine rollout and the reopening of the economy while maintaining a low number of infections.
• Consumer price inflation (CPI) rose at an annual rate of 0.7% in March, up from 0.4% in the previous month. The rise is the start of what most economists expect will be a return to normal levels of inflation as lockdown draws to a close. Loose monetary policy and the release of pent-up consumer demand as built-up savings are spent will usher in a period of rising prices. BoE governor Andrew Bailey is among those who argue inflation will probably rise towards 2% in the next few months. The rise in inflation coincides with the latest UK consumer confidence index (a measure of how people view the state of their personal finances and wider economic prospects), which rose to its highest level since February 2020 when COVID-19 restrictions first began.

GLOBAL ECONOMY

• The IMF now believes that global GDP per head between 2019 and 2022 will be just 3 percentage points lower than forecast in January 2020. However, this masks significant differences between countries with growth in richer countries (who have been able to mitigate the pandemic’s effects with fiscal and monetary policy measures as well as speedy vaccine rollout) forecast to be just 1 point down, whereas poorer countries (who have been affected by a slower rollout of jabs and have experienced debt problems and lower tourism-related revenues) face falls of up to 6.5 points. Meanwhile, the number of people driven into extreme poverty induced by the pandemic could hit 124m – up from an estimate of 88-115m in October 2020.
• Already stretched global logistics networks by the pandemic have been impacted by backlogs from the Suez Canal blockage according the IHS Markit purchasing managers’ index. Eurozone supplier delivery times are at their longest in 23 years and, as a result, eurozone factory input cost inflation has accelerated to its highest level in a decade. Ships are having to wait longer to discharge their cargo and the congestion is creating knock-on problems beyond the docks. Trucks and railways that move goods to and from ports have become bottlenecks with UK importers saying that goods which were held up in the Suez and were originally due to arrive now would take up to 10 more weeks, partly because of limited slots for trucks at warehouses.