Year Review

January

Construction starts the year in the doldrums. The Glenigan Index shows project starts had dropped by 29% year-on-year in the three months to December. The number of residential schemes commencing on site was 31% lower, while civil engineering starts were down by half.

The Federation of Master Builders adds to the gloom with research showing small and medium-sized building firms face a fourth successive year of shrinking workloads, whileone in three expect to have to cut jobs. The organisation also warns that January’s increase in VAT from 17.5% to 20% will costnearly 7,500 construction jobs in 2011.

However, it was not all bad news. The National House- Building Council (NHBC) said that new home registrations had risen from 7,149 in Q4 2009 to 7,385 in Q4 2010. New home registrations for 2010 as a whole stood at 115,458, up from 88,083 the year before.

Elsewhere, the workforce building London 2012 venues such as the Olympic Park and Athletes’ Village nears its peak, with 12,112 staff on site, according to the Olympic Delivery Authority. Twenty-four per cent of the builders live within the five Olympic Park host boroughs, while 60% live in London.

February

The Royal Institution of Chartered Surveyors (RICS) warns that the construction sector’s recovery

has “run out of steam” as public sector cuts and a lack of finance hit workloads. A net 5% of its members reported a decline in activity between October and December. Another 56% said that the cost of materials had risen and 14% predicted that employment levels would fall over the next 12 months.

Elsewhere, bad news from the tail-end of 2010 continues to filter through, with the Home Builders Federation (HBF) reporting a third successive quarterly decline in local authority planning permissions for new properties. This leaves the number of permissions being granted at less than half the level seen in 2006.

Despite the industry’s troubles, an ICM poll for National Apprenticeship Week shows that demand for construction-related apprenticeships is on the rise. Three-quarters of respondents think that an apprenticeship could lead to a better career than a purely academic qualification – and 46% say that higher university tuition fees have made vocational training more appealing.

The Design Council and CABE announce they will merge from 1 April to create a “one stop shop” offering design advice to industry, communities and central and local government.

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

March

In the Budget, Chancellor George Osborne announces backing for a number of major infrastructure projects, including an extra £200m investment in regional railways. He also unveils a £100m fund to help councils repair potholes, 50,000 additional apprenticeships over the next

four years and the extension of the University Technical Colleges programme to create 24 training institutions.

However, his £250m shared equity scheme for homebuyers is seen as a “missed opportunity” by construction union UCATT. It argues that if the Government was serious about helping unemployed builders and restoring confidence in the industry, it would pump money into building new social housing for rent instead.

The union also raises concerns that integrating income tax and national insurance contributions could allow unscrupulous employers to force workers into “false selfemployment”.

Other Budget measures include proposals for overhauling the planning system, which would see national targets for brownfield use scrapped and a new presumption in favour of sustainable development. In addition, Osborne says that MoD land will be used to deliver 20,000 new homes by 2014-15.

April

The NHBC offers a reprieve from the gloom with data showing the number of new home registrations had hit a threeyear high in March at 13,307.

The completion of properties at the Olympic Athletes’ Village gives the figures a substantial boost, but when these homes are excluded the total is still the highest since July 2010.

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The HBF also provides some cheer with its 2011 customer satisfaction survey, which shows that 88% of people are happy with the quality of their new home and 86% would recommend their builder to a friend.

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

There’s more bad news from the Office for National Statistics (ONS), which says that construction had slipped deeper into recession during the first quarter, despite the wider economy returning to growth. Industry output contracted by 4.7% between January and March after sliding by 2.3% in Q4 2010.

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

UCATT announces that it secured £7.1m in accident compensation for its members in 2010. This was up from £6.35m in 2009. The union’s general secretary, George Guy, says: “These figuresdemonstrate that construction workers remain highly vulnerable to injury while at work.”

May

Property developers need a “radical” new relationship with communities, the Land and Security Commission says. The panel, which was established by the Royal Institution of Chartered Surveyors, believes greater cooperation is needed between builders and residents to challenge the preconception that community involvement hampers private sector investment.

The fifth annual skills audit from the Chartered Institute of Building shows there is still adearth of builders with the right technical know-how. Seventyseven per cent of construction professionals blame the skills shortage on a lack of good training and investment. Eightyfive per cent are worried there will not be enough skilled staff when the industry needs them.

The FMB warns that the Government’s hopes for an eco-friendly revolution may be dashed, as 44% of its members believe homeowners are unlikely to take advantage of the Green Deal when it
launches in autumn 2012. However, 70% believe a 5% reduction in VAT on energy efficient materials would help to stoke interest.

June

Underlining the risks construction workers face, the Health & Safety Executive shows the rate of deaths in the industry rose to 2.4 per 100,000 workers in 2010-11, compared with a rate of 1.9 per 100,000 workers in 2009-10.

Between April 2010 and March 2011, 50 construction workers were killed, up from 41 fatalities the year before.

UCATT’s George Guy says that the figures are an “urgent wake-up call” for the Government and its “policy of cutting safety laws and legislation”.

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

New orders increased and mothballed projects resumed, leading to the first increase in employment for the sector since June 2010.

Business minister Mark Prisk outlines a plan for Government and the construction industry to work together to decarbonise the built environment by 2050.

It calls for a new coordinating body – the Green Construction Board – along with reforms to public procurement, greater transparency around incentives and measures to maximise exports of UK expertise in areas like zero-carbon homes and retrofitting.

Elsewhere, however, the Government comes under fire for changes to the rate at which Feed-in Tariffs are paid on large-scale energy installations. The British Property Federation warns that the move has dented industry confidence in the scheme and could discourage investment in renewables. Climate change minister Greg Barker responds by saying without the changes, the FIT system would be “overwhelmed”.

July

The bad news just keeps on coming. Glenigan says that the underlying value of construction projects started in the three months to June was down by 24% year-on-year.

Figures from the FMB show one in three SMEs in the building industry have been forced to cut jobs in the previous three months and 29% expect to lose more staff in the next six months. The federation says that employment in the sector has been falling for three-and-a-half years and, even by conservative estimates, the industry has lost 125,000 skilled workers.

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A report from PricewaterhouseCoopers shows that along with manufacturing, construction has been the sector hardest hit by the economic downturn. Between Q3 2009 and Q2 2011, 5,126 building firms collapsed.

There was some cause for optimism on the development front when the Homes and Communities Agency announced that 150 housing associations, builders and other providers would share £1.8bn to deliver affordable homes. The scheme is expected to deliver 80,000 properties.

Elsewhere, minister Greg Clark announces a proposal that will require local authorities to decide planning applications in no more than 12 months.

Government figures show 3,200 applications submitted in the 2010-11 fi nancial year took more than 52 weeks to be resolved.

One of Britain’s most wellknown builders, Taylor Wimpey, completes the sale of its North American arm for $1.2bn (£744m). The company says that it plans to focus solely on the UK market.

August

The PMI report from CIPS and Markit shows new contract wins and an increase in tendering

opportunities led to “solid” growth in July. The rise was driven by a sharp expansion in civil engineering, but the commercial sector slowed and residential construction activity contracted for a second straight month.

Indeed, the number of planning permissions granted in england between April and June was the second lowest for any quarter in the past fi ve years at just 25,171, according to the hBF. This also marked a 24% decline on the first quarter.

However, figures from accountant Grant Thornton showthe number of construction companies going into administration in the second quarter was down by 16% compared with the fi rst three months of the year.

The mood among construction fi rms remains cautious, with a survey from Santander finding that survival is the immediate priority for over half (52%) of directors of companies with turnovers under £20m.

Elsewhere, the Treasury select committee criticises the Private Finance Initiative as “extremely inefficient”, saying it suffers from high borrowing costs and does not provide taxpayers with value for money. Nevertheless, it adds, the scheme continues to encourage “poor investment
decisions” because it allows whitehall departments and other agencies to commit to big capital programmes without having to find large sums up front.

September

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

were down by 16.3% on January to March, and were 23.2% lower year-on-year.

Industrial strife also flared, with Unite warning that an eight-strong group of “rogue” construction fi rms planned to break five long-held agreements on terms and conditions and replace them with new arrangements that would allow them to introduce semi-skilled grades and dictate rather than negotiate pay, holiday entitlement, overtime and what constitutes away work.

There was better news from the National Access and Scaffolding Confederation. Its annual safety report showed that scaffolding accidents had fallen by 20% in the preceding 12 months, despite the number of scaffolders increasing.

October

Construction activity is unlikely to return to growth until 2014, making the current downturn the worst in 30 years, the CPA says. Housing starts are projected to fall by 1% in 2011 and 4% in 2012, while public sector construction including PFI is forecast to shrink by 24% by 2014. Private sector construction is expected to rise by 18% by 2015.

In Westminster, Mark Prisk announces that the Government’s chief construction advisor, Paul Morrell, will stay on for an extra year so he can oversee the establishment of the Green Construction Board and the implementation of reforms in the Government Construction (Procurement) Strategy.

Sticking with the Government, HBF chief executive Stewart Baseley urges ministers to ignore the “complete and utter nonsense” coming from critics of the draft National Planning Policy Framework.

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

Official figures show just 103,000 new homes were built in England during 2010, the lowest peacetime total since 1923.

November

Amid growing economic uncertainty, public sector cutbacks and a lack of finance for projects, RICs says that construction activity was broadly flat in the third quarter. A balance of 1% of its members said that workloads fell and many reported providing quotes for projects that then failed to progress.

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

For its part, the FMB says that the housing strategy, which would introduce a mortgage indemnity scheme for people buying new homes, is nowhere near radical enough and will do little to help SMEs.

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

Figures from CR Management show the number of building firms entering administration has risen by 10.5% between the second and third quarters to 94. This is up by 38% year-on-year.

CR Management founding partner Alan Harris says the past three months have seen a number of “established names” cease trading, including Holloway White Allom and Linford Construction.

In his Autumn Statement, Chancellor George Osborne announces £574m in funding for 20 major infrastructure projects designed to kick-start the economy.

Lend Lease’s planned £700m Tithebarn regeneration scheme for Preston city centre is abandoned after anchor tenant John Lewis pulls out of the project.

December

Deputy prime minister Nick Clegg uses a visit to the Leeds College of Building to unveil plans for a £1bn scheme to tackle youth unemployment. Designed to help 500,000 18 to 24-year-olds into work or apprenticeships, it will provide employers with £2,275 towards the wages of each young person they recruit.

Elsewhere, the Government builds on its infrastructure announcements in the Autumn Statement with £854m for another 21 projects, including a River Wear bridge in Sunderland and an extension of the Metropolitan Line to Watford.

Alan Crane CBE, whose construction career involves projects such as Canary Wharf, Eurodisney and Petronas Towers in Malaysia, becomes the 109th president of the Chartered Institute of Building, succeeding Wates Group deputy chairman, James Wates.

Carillion announces that all 4,500 employees in energy services division have been put on redundancy notice. The company blames the move on the Government’s decision to half the Feed-in Tariff for domestic solar energy installations. Around 1,500 jobs are expected to go.

The final CIPS/Markit PMI report of the year offers a speck of light at the end of the tunnel. Output increased for a second straight month in November, it says, mainly thanks to a rise in new business, which grew at the fastest rate since May. In turn, higher workloads fuelled an increase in employment. Although modest, job creation increased at the strongest rate since March 2008.

Optimism picked up, as did house building, although both were coming from such low levels that CIPS chief executive David Noble cautioned it was not “the start of a new dawn”.

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

Construction companies’ main concern is that wider economic uncertainty will impact negatively on clients’ spending decisions. It will be interesting to see if the Government’s infrastructure plans, announced in the Autumn Statement, will lift construction industry confidence from its current low level.”

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