- Housing secretary Michael Gove has said that the soon-to-be published national planning policy framework – the Levelling Up and Regeneration Bill – will drive greener development and improve environmental outcomes, despite no mention of net zero carbon in the bill. There is no reference to the net zero test, which estimates the impact of policy decisions on greenhouse gas emissions, in the bill. The UKGBC’s Chief Executive Officer, Julie Hirigoyen said:
“In the climate crisis, it is unfathomable not to see net zero as a centrepiece of the Levelling Up and Regeneration Bill. Today’s Bill could have reset how the planning system ensures sustainable development becomes the norm through design and local planning requirements, but we merely got a small step in that direction. As the Bill goes through Parliament, we want to see amendments that will deliver a truly sustainable planning system, where it acts as the fulcrum to align planning with our legally binding climate targets and net zero pathway.”
- Data from Glenigan shows the value of construction starts edged marginally higher in the three months to May 2022 compared to the previous rolling quarter (to April 2022). The underlying value of project starts rose by 1.2% in May compared to the previous three-month period, from £5.04bn to £5.1bn. Following the Ukraine crisis, new starts on site dipped by 12.6% in the three-month period to April but May’s data paints a slightly more optimistic picture. Glenigan noted that over the past 12 months a strong development pipeline of contract awards and planning approvals has built-up but explained that the modest uptick in new starts should be approached with cautious optimism. The value of starts in the three months to May 2022 was still nearly 19% lower than the same period in 2021, while “…external influences…continue to send shockwaves through UK business and industry, with supply chains tightly squeezed throughout the first half of 2022.”
- According to May’s S&P Global/CIPS UK Construction PMI Survey, workload expectations were the least upbeat since August 2020. The survey’s Future Activity Index shows although almost half of the survey panel (46%) still predict a rise in business activity over the next 12 months, 19% now forecast a reduction in activity. The proportion of purchasing managers anticipating lower activity during the year ahead is now much greater than it was at the start of 2022, when just 5% of all respondents predicted lower activity growth. Worries about higher borrowing costs, economic uncertainty and the war in Ukraine were all cited as reasons for the expected fall in business activity growth.
- A study by academics from the University of Cambridge and Edinburgh Napier University has found that factory-produced homes can produce up to 45% less carbon than traditional methods of residential construction – significantly lower than RIBA industry carbon reduction targets. The study found that two modular housing schemes designed by HTA Design, consisting of a total of nearly 900 homes, saved a combined 28,000 tonnes of carbon. According to the researchers of the study, emissions are “dramatically” lower when modular systems are used because units are completed offsite in a controlled assembly line environment and taken to site in one delivery. Fewer carbon-intensive products such as steel and concrete are required, and less transport for on-site workers and material deliveries is needed.
- The Construction Leadership Council (CLC) has published findings of its second pan-industry Professional Indemnity Insurance (PII) survey. According to the 652 respondents, it is not getting any easier to buy PII insurance due to high cost premiums and limited availability of cover. This is limiting the ability of firms, particularly SMEs, to take on building safety remediation work where cover for fire safety is required. According to the survey results:
- 17% of respondents are paying more than 5% of their turnover for their annual premium; 5% are paying more than 10% of their turnover for their premium
- 22% of respondents are still unable to buy the cover they want or need (a slight improvement on 29% in 2021)
- 68% had restrictions on cover for fire safety (the same as 2021)
- 24% have lost jobs as a result of inadequate PI insurance (compared with 31% in 2021)
- 30% have changed the nature of their work due to inadequate PII (compared with 29% in 2021)
- 42% said the experience of buying PII was significantly worse than their last renewal
- 33% have been declined insurance by three insurers or more. (This was 44% in 2021)
- 67% have secured a claim excess that is 2% or less of their turnover (64% last year)
- 12% have an excess that is 21% of their turnover or more (4% said this last year)
- UK construction output fell by 0.4% in April compared to the previous month – the first monthly contraction since October 2021. The drop in total output was driven by weakness in almost all repair and maintenance sub-sectors, which collectively contracted by 2.4% – more than offsetting the 0.9% growth in new work. The fall in repair and maintenance work in April 2022 is partly a by-product of the (3.0%) growth in March 2022 from strong demand following February storms. However, April’s decrease in overall output comes after a record monthly level of output in March (£14,994 million) and output still remains 3.3% above its pre-pandemic level. The private industrial and infrastructure sectors were the biggest drivers of output growth in April 2022.
Client & Contractor News
- Fit-out projects helped drive revenue growth at ISG in 2021, with its global fit-out business accounting for nearly 63% of the firms £2.2bn of revenue. Group pre-tax profits also recovered, rising from £8.9m in a COVID-hit 2020 to £18.5m in 2021. ISG noted 2021 was one of fit-out’s most profitable years, helped by several high-profile deals such as the overhaul of Barclays Canary Wharf HQ and Facebook’s HQ in King’s Cross. With a record forward order book, ISG expects continued strong demand as firms look at ways to refresh their office space post-pandemic.
- The delayed Royal University Hospital in Liverpool, initially meant to open five years ago, is on track to open this Autumn. Serious problems with the project emerged following the collapse of original main contractor, Carillion, including several concrete beam fractures and cladding failing fire safety tests. Laing O’Rourke took over the project in 2018 but a report two years later from the National Audit Office projected that the overall cost of scheme could exceed £1.1bn. It was initially meant to cost £335m. In February, ground was broken on the podium entrance and drop off facility, the final significant element of the build programme.
- Interserve’s shareholders have agreed a deal to separate its construction division, Tilbury Douglas, from its parent company to become a standalone business as a contractor. The move paves the way for the eventual winding-up of what was once of the UK’s biggest outsourcing conglomerates after it went into administration just over three years ago – a consequence of a disastrous foray into the energy from waste sector. Tilbury Douglas, which will continue to be owned by Interserve investors, is a major public sector contractor with a current order book estimated to be worth c.£1bn. Kier had originally been mulling over a move for Tilbury Douglas in an effort to increase its turnover but ended takeover talks a few months ago.
- Grosvenor Property UK (GPUK) has launched a biodiversity strategy that commits to a 20% biodiversity increase on managed green space and a 100% rise by 2030 on developments using DEFRA's Biodiversity Metric 3.0 (which provides a way of measuring and accounting for nature losses and gains resulting from development or changes in land management). Grosvenor plans to do this by creating living roofs, wildflower-rich grassland and wildlife-friendly planning. The strategy exceeds best practice and is part of GPUK’s ambition to create a significant biodiversity net gain across its portfolio as well as new developments. Tor Burrows, Executive Director, Sustainability and Innovation, Grosvenor Property UK said:
"Biodiversity and the management of urban places are often seen as two separate fields, but we know that this shouldn't be the case. Humans have an intrinsic link with the natural world no matter where they live and work. We believe urban areas can again become nature-rich through biodiversity strategies and targets like ours, bringing a myriad of benefits for nature, communities and cities."
- The John Lewis Partnership has revealed the first three store locations where it proposes to build new build-to-rent (BTR) homes. The sites include building over Waitrose shops in Bromley and West Ealing in Greater London, as well as replacing a vacant John Lewis warehouse in Mill Lane, Reading. John Lewis has committed to deliver 10,000 homes in the next 10 years – 5,000 of these will come from schemes on the Partnership’s own property portfolio. Around 20 sites have been identified that the Partnership will extend or redevelop with BTR schemes, and then become the landlord of once completed. The homes will be of different sized households but designed to John Lewis’ high standards and provide options for short/long-term tenure and come with facilities such as roof gardens and fitness studios. Moving into the rental homes market is part of the firm’s long-term plan for 40% of its profits to come from outside of retail by 2030.
Materials & Commodities
- The CPA’s latest trade survey has found that nearly half of construction materials manufacturers reported higher sales in Q1 2022 than in Q4 2021. Although annual construction product inflation was at nearly 25% in April, increased sales were reported by some 50% of light side manufacturers (eg makers of fit-out components) and 43% of heavy side manufacturers (ie producers of steel and concrete) in Q1. Construction product manufacturers have seen positive sales growth for seven consecutive quarters, despite ongoing issues and cost pressures. The CPA expects that positive sales growth momentum will continue into the second quarter, with 71% of heavy side firms and 73% of light side firms anticipating increases in product sales, on balance.
- BEIS data shows construction material prices continued to increase in April. After the ‘All Work’ index rose nearly 5% in March – the largest month-on-month increase since records began – April saw a further 2.3% rise in material prices. Steel and rebar prices both rose in April (by 1.4% and 2.1%), as did other energy-intensive products and materials such as cement/concrete, but it was imported wood that saw the biggest monthly increase. Prices for imported sawn or planed wood were up 11.6% compared to the previous month due to the loss of supply from Russia – representing a reversal of its five-month downward price trend. However, May’s UK Construction PMI survey suggests this rise will be a short-term upward spike as other exporting nations build up saw mill production and inventories.
- The UK economy contracted in April, missing growth forecasts and confirming the post-pandemic recovery has stalled as surging prices hit household spending and business activity. UK GDP fell by 0.3% in April, well below the 0.1% increase forecast by polled economists. The data followed two months without growth in the worst combination of surging prices and lack of economic expansion since the 1970s. Recently, the OECD cut its UK growth forecast for 2023 to zero – the lowest in the G20 excluding Russia – to reflect the impact of high inflation and rising interest rates.
- The number of full-time employees in the UK is now at a record high, while redundancies are at a record low and the number of vacancies at a new record high of 1.3 million. ONS employment figures suggest that stalling economic growth has not yet taken the heat out of the UK’s tightening labour market. The overall unemployment rate stood at 3.8%, slightly above the 50-year low reached the previous month, but still lower than when the pandemic struck. The strong jobs data is likely to reinforce the case for the Bank of England to increase interest rates this week, despite clear signs that economic growth is beginning to slow.
- The Bank of England (BoE) is expected to hike interest rates (from its current level of 1%) when its Monetary Policy Committee meets on 16th June. Economists are forecasting that the Bank of England will raise interest rates by a quarter percentage point on Thursday, although some do not rule out a rise of half a point — taking rates to 1.5%. The Bank is under growing pressure to tame inflation, which is currently running at its highest level in 40 years at 9%. Any increase to the base rate would represent the fifth consecutive increase by the BoE, with some economists suggesting that raising interest rates would put the brakes on an economy that is already slowing of its own accord.