Construction prospers outside of the bubble

The nation’s capital and the wider South-East region continue to dominate industry research and analysis.

There is little doubt that this large “bubble” of activity has boosted the UK’s overall construction fortunes for many years.

However, there is growing evidence that life does exist outside of the traditional hot-spot – and not just for major infrastructure projects such as road building and rail development.

Commonwealth bonus

For example, housebuilding is boosting the West Midlands construction sector. The number of new homes starting construction only rose in three of the UK’s dozen regions in the third quarter of this year.

The West Midlands led the way with a 52% surge as work began on 4,760 units according to the National House-Building Council.

The sector was boosted by the 1,200 homes that form part of the athletes’ village for the 2022 Commonwealth Games.

Even without this project, housing starts in the region would have risen nearly 14% as more and more new homes are being built.

Demand is strong as house prices rose 2.1% in the 12 months to Q3 2019 according to the Nationwide, making the West Midlands the fourth best performing housing market in the UK.

Residential work is at the forefront of a swathe of regeneration projects in the West Midlands. Earlier this year, the West Midlands Combined Authority (WMCA) unveiled a £10 billion programme of regeneration work comprised of 24 major projects. Many featured large elements of residential development, such as the UK Central Hub, which will include 4,000 homes.

WMCA chief executive Deborah Cadman said: “The investor-friendly WMCA is focused on providing our region with strategic leadership and the local knowledge needed to succeed.

“Supported by the UK Government’s ambitious Industrial Strategy, we are building tomorrow’s homes, creating vibrant and thriving mixed-use places, investing in world-class infrastructure, and transforming the West Midlands into the UK’s growth capital.”

Housebuilding helps Northern Ireland

The private housebuilding sector is buoying the struggling Northern Irish construction industry.

After two years without a government due to a political stalemate, the level of public sector construction work is falling as decisions on new projects are deferred.

Only one sector has registered a rise in work. This is housebuilding, where activity is increasing at its fastest level for more than two decades.

Jim Sammon, Northern Ireland construction spokesman for RICS, said: “The new build private housing market continues to perform well. However, construction activity is no doubt affected by on-going political instability, which has had a considerably negative impact on public works in particular.”

Mounting a defence

It isn’t just individual regions that are performing well. Industry analysts Glenigan also point out that a significant programme of investment in the country’s military estate is generating a good flow of new construction opportunities.

Out of total defence spending by the Ministry of Defence of £38.1 billion, some £4.26 billion was spent on infrastructure in 2018/19, according to the MoD’s latest report and accounts. Glenigan Construction analysis suggests this is translating into a healthy pattern of new construction contract lettings.

One of the civil engineering industry’s largest projects in recent months was confirmed in late August when the Defence Infrastructure Organisation let a £75 million contract to resurface the runway at RAF Lossiemouth at Moray in Scotland to VolkerFitzpatrick.

Investment in infrastructure to support the Royal Navy is also generating new construction contracts. Construction work on military facilities around the country is also providing a useful source of medium-size building contracts for the industry.

Indeed, work is set to start next Spring on a new headquarters building for the Defence Infrastructure Organisation itself. Detailed plans have been granted for the £5.26 million, three storey 2,700 sq m office building at Whittington Barracks in Lichfield which is at the pre-tender stage.

North West upturn

Glenigan is also forecasting a significant upturn in the North West during 2020.

The underlying value of construction project starts in the North West has grown consistently since 2016 according to Glenigan’s industry analysis but after a retreat this year, some sectors offer promise.

“Manchester is increasingly being seen as the UK’s second city in terms of investment in commercial space and its reputation is being bolstered by high profile schemes such as Manchester Airport City, but the bubble is showing signs of bursting this year,” says Glenigan’s economics director Allan Wilén, who expects starts to fall by around 15% in the North West in 2019.

Education

There are also predictions of a £1bn boom in spending on Scottish schools as the first batch of schools to receive funding from the Learning Estate Investment Programme (LEIP have been unveiled.

A total of 26 schools will be replaced and 11 have been announced with more to be identified in the coming months. Education Secretary John Swinney said: “We are committed to making even more progress and I have seen myself the urgency with which some schools require updating. The first phase of the £1 billion Learning Estate Investment Programme prioritises schools in need of updating or where there are significant capacity issues.”

The Scottish Government is working in partnership with local authorities across the country and will contribute between £220 million and £275 million of central funding. The Scottish Futures Trust will act as managers on the programme.

Welsh construction

Equally, spending of £1.5bn is expected to materialise for the Welsh education construction sector through a new public private delivery model being set up by the Welsh government to deliver a major new programme of school and college building.

The proposals involve a private sector partner entering into a joint venture with the Development Bank of Wales. The two parties will form a new Welsh Education Partnership Company to provide project development and delivery, supply chain assembly and management on new schools and colleges.

The likes of Glenigan and Barbour ABI are regularly reporting on such developments throughout the UK and are also quick to point out that although the Westminster Government’s priorities in recent years have been housebuilding and infrastructure, regionally the success stories can be found across a much wider range of sectors.

Paul Groves is editor of Specification magazine