On 27th January we held a Winter 20/21 Market Report Webinar. With so many interesting questions we were unable to answer them all live, therefore our experts answered them below.
Do we know to what extent Brexit, along with its regulations, will constrain construction growth due to labour availability and shortages?
It is anticipated that Brexit will have an impact on labour availability and therefore construction growth. 73 per cent of respondents to our survey said that there is currently a shortage of skilled labour in the UK, and 81 per cent believe that a shortage of skilled labour post-Brexit would increase construction costs.
Certain regions and trades are expected to be particularly impacted. For example, Eve Livett of the Association of Brickwork Contractors said to Construction News that “There are large London-based bricklaying companies who have 80 per cent of their workforce as EU nationals.” This has been compounded by the Migration Advisory Committee (MAC) advice for masons, bricklayers, and welders to be added to the shortage occupation list not being accepted, with the Home Office preferring instead to wait and see how the recovery from COVID-19 and the new system of immigration shape the labour market.
There are some large infrastructure schemes / public sector programmes which are looking for significant levels of resource and whilst it is recognised that apprenticeship schemes and attracting new entrants into the industry will help in the longer term, there could be a short-term impact on labour availability as a result of Brexit, although this is dampened slightly by the ongoing impact of COVID-19 and the increasing use of MMC, particularly offsite components, to reduce onsite labour.
For further information see page 12 of the full market report.
Do you see more residential housing in town centres?
As Sara mentioned in the webinar, town centres will be regenerated in the coming years as the pandemic has accelerated the changing of habits which were being seen before. There will continue to be a mix of uses relevant to areas, from residential through to commercial, education health and community, as learning and well-being become vital components in our urban offering and acknowledge the biophilic agenda. Schemes are coming forward to repurpose voids to residential mixed-use schemes, such as the adaptive repurposing of the now-closed Birmingham Debenhams department store into a mixed-use office, residential and retail development. There are some challenges with repurposing and ensuring that quality spaces are created which attract people to live, work and socialise.
For further information, please see our Spotlight piece ‘Changing Places - A new chapter for urban regeneration’.
With the no tariff deal being done on Brexit, do we feel the current supply concerns are short term or longer term in respect of the key building elements?
The current supply concerns are likely to be shorter-term issues. As the new customs checks become more widely understood, the related delays will reduce. The situation has been exacerbated by COVID-19 and due to the pandemic, the government is delaying full customs checks on non- “controlled” goods entering from the EU until 1st July. It is likely that there will be delays when full declarations at the border are required, which could impact materials and supplies used by the construction industry.
Towards the end of last year, the pandemic, stockpiling and Christmas rush were causing mounting pressure on ports and deliveries. Felixstowe, the UK’s largest container port, has been experiencing delays since October 2020 and a shortage of empty shipping containers in Asia is causing further problems as the costs for containers escalate due to demand. Delays as vessels dock is causing carriers to favour European ports instead, meaning containers are then moved by truck, adding further cost and time to the deliveries.
In addition to the pressures of materials supply and costs due to Brexit, steel prices have recently surged as a result of global demand, following both the restart of the industry after the pandemic and increases in raw material costs. It will be important to track materials as the world looks to recover from the effects of COVID-19.
What are the significant material shortages?
The following packages were those voted by contractors as having the highest risk of being impacted by Brexit:
- Façade related packages
- M&E services
The threat of materials shortages is not only from Brexit but also from the consequences of the pandemic. See response to the previous question for further information.
Is there any sign of procurement looking to localise following Brexit and import issues?
We are starting to see some evidence of localised procurement, 82 per cent of contractors who responded to our survey said that their organisations have made contingency plans to assist with overcoming issues with importing materials. Of those, 68 per cent said that they were looking to use alternative products or materials to avoid importing.
The UK market and Indian market are interconnected?
Due to the ongoing impact of COVID-19, the UK and Indian construction industries are facing some of the same challenges. Our Indian Insights and Analytics team recently published a Biannual Report into the Construction Costs in India.
To what extent does the panel think that successful schemes will be let upon a renewed balance of MMC, sustainability, social value and agility of central-local government (in particular planning consent)?
We are seeing a focus on these themes within public procurement, particularly as part of the recently launched Construction Playbook. This reinforces the importance of outcome-based procurement, social value and continues to look at innovation to help with achieving project briefs, in particular, the government’s presumption in favour of MMC is continuing. The government is looking to “build back better” and the planning reforms are looking to modernise the planning system with communities at the heart and promote the reuse of brownfield land. We expect that decisions will be made considering sustainability and social value-driven by government targets and funding, but these values are, and will continue to be, adopted by the private sector too.
Do Gleeds have any insight regarding consultants’ fees which from our perspective appear to be falling in an effort to fill the pipeline?
Whilst some sectors are becoming more competitive, we are starting to see a trend moving away from the “race to the bottom” – led by the public sector and consideration of other types of value in addition to lowest cost. The Construction Playbook is encouraging longer-term contracting and partnerships which will allow for investment and ultimately better project outcomes.
Do the panel think more opportunities will be coming via frameworks as opposed to invited tender competitions? And do they think that’s helpful?
We are starting to see more opportunities via frameworks, several of the comments we received from contractors and from around the business as part of the regional updates included in the report are related to high tendering costs and that frameworks are becoming more common to reduce these. This also relates to the comment above for question 8 and the trend towards longer-term partnership and more collaboration.
Often the effect of a crisis is not seen immediately, what risks do you see in respect of employers, contractors, subcontractors etc. becoming insolvent in the coming years?
You are correct that this is a risk, not only in the short term. The Construction Playbook is considering this in the public sector with resilience planning and this is suggested as good practice to try and minimise the impact if insolvency is an issue on a project. Appropriate due diligence should be undertaken to understand a company’s position and provisions for Performance Bonds etc. can be considered.
Who do you think should hold the responsibility of implementing new technologies (Drones, AI, AR etc.)? Contractor, Consultant, Client or External?
The implementation of new technologies should not fall to only one party. There are opportunities to use different types of technology at various stages (if not all stages) of the design and construction process which in itself suggests that all parties should be looking for opportunities to use technology and innovation to make the construction industry and the processes involved more efficient. This is further supported by the Construction Playbook.
How do the panel see higher education, both educational and accommodation being impacted by both COVID-19 and Brexit?
While there are obvious challenges to the sector from Brexit and COVID-19, there remain opportunities for the sector in the longer term. In our regional updates of the market report, there are mentions of education and student accommodation projects continuing for universities. See our higher education sector update from Heather Makin on page 28.
Addressing the skills shortage, do you think the current problems COVID-19 has caused on education will worsen this problem?
It is hard to say, but it is likely that there will be some impact. For instance, only 12 per cent of respondents to our survey think that the latest initiatives by the government to facilitate more apprenticeships will provide sufficient skilled tradespeople insufficient time.
With the announcement that there is a shortage of containers (and international shipping), and, as factories close for a month in China for their new year, do we see a greater focus on MMC and volumetric solutions?
We have received reports of contractors looking to offsite components and other MMC solutions to try and reduce onsite labour requirements as a result of the implications of COVID-19 and social distancing measures. We also think that contractors will look towards MMC to reduce potential issues with importing materials, with 59 per cent of the 82 per cent of the contractors who said that their businesses have contingency plans saying that these involved increased use of MMC.
One sector that hasn't been mentioned is science & tech. Is this something that you are seeing any growth in?
This is a sector where growth is anticipated – this is something that we have discussed in detail in our market report on page 32.