UK Construction Industry Year in Review 2010

January

Construction has a slow start to the year. According to the Glenigan Index, project starts fell by 29 percent year on year in the three months to December. The number of residential schemes that started on site was 31% lower, while civil engineering starts were cut in half.

The Federation of Master Builders adds to the gloom with research indicating that small and medium-sized building firms are facing a fourth consecutive year of shrinking workloads, with one-third expecting to cut jobs. The organisation also warns that the increase in VAT from 17.5% to 20% in January will cost nearly 7,500 construction jobs in 2011.

But it wasn’t all bad news. According to the National House-Building Council (NHBC), new home registrations increased from 7,149 in Q4 2009 to 7,385 in Q4 2010. The total number of new home registrations in 2010 was 115,458, up from 88,083 the previous year.

In other news, the Olympic Delivery Authority reports that the workforce building London 2012 venues such as the Olympic Park and Athletes’ Village is nearing its peak, with 12,112 workers on the job. 24 percent of the builders live in one of the five Olympic Park host boroughs, while 60 percent live in London.

February

The Royal Institution of Chartered Surveyors (RICS) is concerned about the construction industry’s recovery.

As a result of public-sector cuts and a lack of funding, workloads have “run out of steam.” Between October and December, a net 5% of its members reported a decrease in activity. Another 56% reported that material costs had risen, and 14% predicted that employment levels would fall in the next 12 months.

In other news, the Home Builders Federation (HBF) reported a third consecutive quarterly decline in local authority planning permissions for new properties, continuing a trend that began at the end of 2010. This reduces the number of permissions granted to less than half of what it was in 2006.

Despite the industry’s difficulties, an ICM poll conducted for National Apprenticeship Week found that demand for construction-related apprenticeships is increasing. Three-quarters of respondents believe that an apprenticeship is more likely to lead to a better career than a purely academic qualification – and 46% believe that higher university tuition fees have made vocational training more appealing.

The Design Council and CABE have announced a merger that will take effect on April 1st, creating a “one-stop shop” for design advice to industry, communities, and central and local government.

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The High Court rules that education secretary Michael Gove’s decision to cancel six Building Schools for the Future projects was unlawful because he failed to properly consult with the councils affected. According to Justice Holman, the move was “so unfair as to amount to an abuse of power.”

March

Chancellor George Osborne announces support for a number of major infrastructure projects in the Budget, including an additional £200 million investment in regional railways. He also announces a £100 million fund to assist councils in repairing potholes, as well as 50,000 additional apprenticeships over the next five years.

four years, as well as the expansion of the University Technical Colleges programme to include the establishment of 24 training institutions.

However, the construction union UCATT regards his £250 million shared equity scheme for homebuyers as a “missed opportunity.” It contends that if the government was serious about assisting unemployed builders and restoring industry confidence, it would instead invest in new social housing for rent and the plant hire industry.

The union also expresses concern that combining income tax and national insurance contributions may allow unscrupulous employers to force employees into “false selfemployment.”

Other Budget proposals include reorganising the planning system, eliminating national targets for brownfield reuse, and establishing a new presumption in favour of sustainable development. Furthermore, Osborne claims that MoD land will be used to build 20,000 new homes by 2014-15.

April

The NHBC provides some solace, reporting that the number of new home registrations reached a three-year high in March, at 13,307.

The completion of properties at the Olympic Athletes’ Village boosts the figures significantly, but even without these homes, the total remains the highest since July 2010.

According to the HBF’s 2011 customer satisfaction survey, 88 percent of people are satisfied with the quality of their new home, and 86 percent would recommend their builder to a friend.

However, it isn’t all roses in April. The “age of bling” for London’s skyscrapers, according to Ken Shuttleworth, lead architect for Foster + Partners on the Gherkin, is over, with financial pressures making projects like the Shard the final flourish of a passing era.

The Office for National Statistics (ONS) has released more bad news, stating that construction fell deeper into a slump in the first quarter, despite the wider economy’s recovery. Industry output fell by 4.7 percent between January and March, following a 2.3 percent drop in the fourth quarter of 2010.

Meanwhile, the FMB reports that small and medium-sized builders’ workloads fell for the 13th consecutive quarter in the three months to March.

UCATT reports that it obtained £7.1 million in accident compensation for its members in 2010. This was an increase from £6.35m in 2009. “These figures demonstrate that construction workers remain highly vulnerable to injury while at work,” says the union’s general secretary, George Guy.

May

According to the Land and Security Commission, property developers require a “radical” new relationship with communities. The panel, which was formed by the Royal Institution of Chartered Surveyors, believes that greater collaboration between builders and residents is required to dispel the myth that community involvement stifles private sector investment.

According to the Chartered Institute of Building’s fifth annual skills audit, there is still a shortage of builders with the necessary technical knowledge. 77% of construction professionals attribute the skills shortage to a lack of good training and investment. Eighty-five percent are concerned that there will not be enough skilled workers when the industry requires them.

The FMB warns that the Government’s hopes for an eco-friendly revolution may be dashed, as 44 percent of its members believe the Green Deal will not be used by homeowners when it launches in autumn 2012. However, 70% believe that a 5% reduction in VAT on energy-efficient materials would help to pique interest.

June

The Health and Safety Executive reports that the rate of deaths in the construction industry increased to 2.4 per 100,000 workers in 2010-11, up from 1.9 per 100,000 workers in 2009-10.

Between April 2010 and March 2011, 50 construction workers were killed, an increase from 41 the previous year.

The figures, according to UCATT’s George Guy, are a “urgent wake-up call” for the government and its “policy of cutting safety laws and legislation.”

According to research from the Chartered Institute of Personnel and Supply (CIPS) and Markit, a rise in house building fuels a “solid expansion” in construction in May.

New orders increased, and projects that had been put on hold were restarted, resulting in the sector’s first increase in employment since June 2010.

Mark Prisk, Minister of Business, outlines a plan for the government and the construction industry to collaborate to decarbonize the built environment by 2050.

It proposes a new coordinating body, the Green Construction Board, as well as public procurement reforms, greater transparency around incentives, and measures to maximise UK expertise exports in areas such as zero-carbon homes and retrofitting.

However, the government is under fire elsewhere for changing the rate at which Feed-in Tariffs are paid on large-scale energy installations. According to the British Property Federation, the move has harmed industry confidence in the scheme and may discourage investment in renewables. Climate change minister Greg Barker responds that the FIT system would be “overwhelmed” if the changes were not made.

July

The bad news just keeps pouring in. According to Glenigan, the underlying value of construction projects started in the three months to June was down by 24% year on year.

According to FMB data, one in every three SMEs in the construction industry has been forced to cut jobs in the last three months, and 29 percent expect to lose more workers in the next six months. According to the federation, employment in the sector has been declining for three and a half years, and even conservative estimates show that the industry has lost 125,000 skilled workers.

According to a PricewaterhouseCoopers report, construction, along with manufacturing, has been the hardest hit by the economic downturn. Between the third quarter of 2009 and the second quarter of 2011, 5,126 construction firms went bankrupt.

On the development front, the Homes and Communities Agency announced that 150 housing associations, builders, and other providers would pool £1.8 billion to build affordable homes. The scheme is expected to result in the construction of 80,000 homes.

In other news, Minister Greg Clark announces a proposal that will require local governments to make decisions on planning applications within 12 months.

According to government data, 3,200 applications submitted in the 2010-11 fiscal year took more than 52 weeks to be resolved.

Taylor Wimpey, one of the most well-known builders in the UK, has completed the sale of its North American arm for $1.2 billion (£744 million). According to the company, it intends to focus solely on the UK market.

August

CIPS and Markit’s PMI report shows new contract wins and an increase in tendering.

In July, opportunities resulted in “solid” growth. The increase was driven by a significant increase in civil engineering, but the commercial sector slowed and residential construction activity contracted for the second month in a row.

According to the hBF, the number of planning permissions granted in England between April and June was the second lowest for any quarter in the previous five years, at just 25,171. This was also a 24% decrease from the previous quarter.

However, according to Grant Thornton, the number of construction companies that went into administration in the second quarter was 16 percent lower than in the first three months of the year.

The mood among construction firms remains cautious, with a Santander survey finding that survival is the immediate priority for more than half (52 percent) of directors of companies with less than £20 million in revenue.

In other news, the Treasury Select Committee slams the Private Finance Initiative as “extremely inefficient,” claiming that it has high borrowing costs and does not provide taxpayers with good value for money. Nonetheless, it continues to encourage “poor investment decisions” because it allows whitehall departments and other agencies to commit to large capital programmes without having to find large sums up front.

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September

Gloom returned with a vengeance in September, with the ONS revealing that new order volumes had dropped to their lowest level since 1980 in the second quarter. workflows

were down 16.3 percent from January to March and 23.2 percent year on year.

Unite warned that an eight-strong group of “rogue” construction firms planned to break five long-held agreements on terms and conditions and replace them with new arrangements allowing them to introduce semi-skilled grades and dictate rather than negotiate pay, holiday entitlement, overtime, and what constitutes away work.

The National Access and Scaffolding Confederation had better news. According to its annual safety report, scaffolding accidents had decreased by 20% in the previous 12 months, despite an increase in the number of scaffolders.

October

According to the CPA, construction activity is unlikely to recover until 2014, making the current downturn the worst in 30 years. Housing starts are expected to fall by 1% in 2011 and 4% in 2012, while public sector construction, including PFI, is expected to fall by 24% by 2014. By 2015, private-sector construction is expected to increase by 18%.

Mark Prisk announces in Westminster that the Government’s chief construction advisor, Paul Morrell, will stay on for an additional year to oversee the formation of the Green Construction Board and the implementation of reforms in the Government Construction (Procurement) Strategy.

HBF chief executive Stewart Baseley, who supports the government, urges ministers to disregard the “complete and utter nonsense” being spewed by critics of the draught National Planning Policy Framework.

Opponents want the presumption in favour of sustainable development to be delayed until local governments have housing plans in place – but Baseley warns that this would “leave us in a planning policy vacuum.”

According to official figures, only 103,000 new homes were built in England in 2010, the lowest peacetime total since 1923.

November

Construction activity was broadly flat in the third quarter, according to RICs, despite growing economic uncertainty, public sector cutbacks, and a lack of project financing. A balance of 1% of its members reported that workloads had decreased, and many reported providing quotes for projects that did not proceed.

A new Government housing strategy provides some hope, but RICS chief economist Simon Rubinsohn says “it remains to be seen whether the scale of the package is truly sufficient to counter the negative factors depressing activity and profits across the sector.”

The FMB, for its part, claims that the housing strategy, which would implement a mortgage indemnity scheme for people purchasing new homes, is insufficiently radical and will do little to help SMEs.

“If the Government was seriously committed to increasing supply, it would reintroduce housing targets for communities that failed in their obligation to meet local demand,” says Brian Berry, the federation’s director of external affairs.

According to CR Management data, the number of building firms entering administration increased by 10.5 percent between the second and third quarters, reaching 94. This is an increase of 38% year on year.

According to CR Management founding partner Alan Harris, a number of “established names” have gone out of business in the last three months, including Holloway White Allom and Linford Construction.

Chancellor George Osborne announces £574 million in funding for 20 major infrastructure projects designed to jump-start the economy in his Autumn Statement.

The planned £700 million Tithebarn regeneration scheme for Preston city centre has been cancelled after anchor tenant John Lewis withdraws from the project.

December

Deputy Prime Minister Nick Clegg uses a visit to the Leeds College of Building to announce plans for a £1 billion youth unemployment programme. It is intended to assist 500,000 18 to 24-year-olds in finding work or apprenticeships by providing employers with £2,275 towards the wages of each young person they hire.

In other news, the Government adds £854 million to its infrastructure announcements in the Autumn Statement, including a River Wear bridge in Sunderland and an extension of the Metropolitan Line to Watford.

Alan Crane CBE, whose construction career includes Canary Wharf, Eurodisney, and Malaysia’s Petronas Towers, is elected as the 109th president of the Chartered Institute of Building, succeeding Wates Group deputy chairman James Wates.

Carillion has announced the redundancy of all 4,500 employees in its energy services division. The company attributes the change to the government’s decision to reduce the Feed-in Tariff for domestic solar energy installations by half. Approximately 1,500 jobs are expected to be lost.

The final CIPS/Markit PMI report of the year provides a glimmer of hope at the end of the tunnel. According to the report, output increased for the second consecutive month in November, owing primarily to an increase in new business, which grew at the fastest rate since May. As a result, increased workloads fueled an increase in employment. Despite being modest, job creation increased at the fastest rate since March 2008.

Optimism increased, as did house building, but both came from such low levels that CIPS chief executive David Noble cautioned that it was not the “beginning of a new dawn.”

“The outlook for the sector remains challenging,” Markit economist Sarah Bingham added, “with confidence over future activity levels remaining subdued.”

The main concern for construction companies is that broader economic uncertainty will have a negative impact on clients’ spending decisions. It will be interesting to see if the Government’s infrastructure plans, which were announced in the Autumn Statement, will boost construction industry confidence from its current low level.”

Last Updated on December 28, 2021

Indra-Gupta

Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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