Here you can learn about the recent updates, particularly on the uncertainty of construction supply due to energy costs. A product group for the Construction Leadership Council has issued a warning that the high cost of energy is having a direct influence on the expenses of labour and raw materials and could further erode difficulties with supply that already exist. Meanwhile, Kier’s construction division racked up a total of £39 million in adjustment items, the largest of which was £22 million in Southern Build restructuring charges and £9 million in cladding repairs. Furthermore, Henry Building Projects has been selected to serve as the main contractor for Tellon Capital’s 40 Broadway project in Westminster, which is now in the construction phase. In addition to that, authorization has been granted to the developer, CIT, to construct a significant office plan in London on stilts. This will make it possible for trees and open public space to flow beneath the structure. Moreover, following a recent gathering of the FMB Scotland Board, director Gordon Nelson presents some input gathered from local building enterprises located all throughout Scotland.
Construction supply uncertainty due to energy costs
Original Source: Energy cost pressures adding to construction supply uncertainty
New research finds that the high cost of electricity will affect the construction supply chain.
Inflation will be a major challenge for building engineering and construction specialists in 2022, according to the CLC’s Product Availability working group. Rising raw materials and labour costs contributed to these worries.
The working group’s co-chairs, Builders Merchants Federation CEO John Newcomb and Construction Products Association CEO Peter Caplehorn, foresee industry upheaval through 2023. They added that these issues will likely endure despite recent pledges to freeze UK energy costs. Prime Minister Liz Truss pledged to cap annual family energy bills at £2,500, with comparable initiatives for corporations starting in October.
The CLC working group said energy risks imperil EU manufacturing. While EU politicians grapple with solutions, manufacturing shutdowns on the continent may lead to shortages of UK exports.
In the current supply market, the working group claimed the overall availability of products needed by building engineers and construction specialists has increased due to slower summer demand. Even with lower demand, supply concerns persist for gas boilers, bricks, aircrete blocks, and semiconductors and other electronic components.
The statement claimed, “The problem affecting smart metres, electrics, white goods, and gas boilers will continue until 2023 as sub-component makers battle to get semiconductors and electronic components in a highly competitive market.”
Electrical component shortages are affecting manufacturers across the industry, leading to reduced availability and higher prices.
Due to material costs, the CLC working group predicts paint and coating demand disruption.
The working group also noted a need for revisions to the UK REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals) Regulations. These describe how to use chemicals.
The CLC stated that any medium-term changes to the restrictions must not make it prohibitively onerous to import construction supplies from Europe.
The statement stated the industry could expect increased timber prices in the fourth quarter and early 2023. Despite obstacles, steel production increased.
CLC: “The EU has filled its non-EU quotas, including the UK.” Heavy sections from the UK mainland to Northern Ireland bear tariffs.
The working group noted that high inflation and decreasing product demand have improved shipping capacity into the country.
Shipping could be affected by strikes at Britain’s fourth largest port, Liverpool, in September.
The CLC working group is especially concerned about construction insolvencies in 2022. The number of insolvent enterprises in the first half of this year was the largest since the 2008 financial crisis.
despite significant demand from January through June.
The working group said, “Given the substantial growth in insolvencies, the significant risk going forward is how severe cost rises and weakening demand would exacerbate the rise in insolvencies.”
Restructuring expenses eat into Kier profits as construction lags
Original Source: Restructuring costs dog Kier profit as construction work slips
After delayed projects and halted work brought construction revenue down 20%, infrastructure is now Kier’s biggest business.
In the year to June 2022, construction income declined from £1.8bn to £1.4bn.
It expected the dip and said the division’s order book for next year was up 27% to £4.2bn. It stated the surge in project prices was affecting public sector schemes. Cost inflation slowed UK government purchases this year.
Kier’s construction arm racked up £39m in adjustment items, including £22m in Southern Build restructuring charges and £9m in cladding repairs.
Infrastructure income rose 17% to £1.7bn and the order book rose 27% to £5.6bn.
Kier also spent £6.5m on redundancy expenses across the group and £7.1m on professional fees, including costs related to the sale of Kier Living and the equity offering in 2021.
Cenkos analyst Andrew Gibb stated, “The exceptionals still need cleaning up, but the fundamental business is growing.” “Infrastructure looks fine.”
It claimed the average month-end net debt was down to £216m from £432m after the Kier Living sale and capital raise. It would have been lower still but for adjustment items; the settlement of a £21 million tax liability to HMRC, deferred by the pandemic; and £29 million of its supply chain lending facility.
It expects average month-end net debt to rise in FY23 due to HMRC and supply chain finance payments, as well as weaker construction business activity until the fourth quarter. In FY24, we expect net debt to decline with free cash flow generation due to the group’s increasing order book, revenue conversion, and working capital inflow. The group expects fewer adjusting items.
Kier’s group sales were steady at £3.3bn in the year to June 2022, but pre-tax profit rose from £5.6m to £15.9m. Pre-adjustment operating profit rose 20% to £121m. Orders rose 27% to £9.8bn.
Andrew Davies, CEO, said [the order book] provides market certainty. The new fiscal year has started well, and we are trading in accordance with our forecasts, despite persistent inflationary pressure. The market picture has not changed. We focus on a sustainable cash position and dividend policy.
The company’s goals for the next three to five years are £4 billion to £4.5 billion in revenue, 3.5% operating margins, and a sustainable net cash position.
Henry Construction wins St. James’ office project
Original Source: Henry Construction wins St James’s office scheme
Henry Construction Projects will come in next month once Erith finishes demolishing the old structures.
The 40 Broadway site, opposite St James’s Park tube station, previously included a 1960s office building with a big car park, a 1920s warehouse-style building, and a 1980s office building.
Tellon received planning permission in 2018 for an eight-story office skyscraper with 135,000 sq ft of customised space. The project features terraces with St. James’s Park views.
3D Reid Architects, Mosaic Consulting Engineers, IN2 MEP Consultants, and Gardiner & Theobald serve as consultants.
Tellon Capital was founded in 2014 by Ben Hamburger and James Burchell.
James Burchell remarked, “We’re happy to provide a top-quality ESG-compliant office building in this great location and to have engaged Henry Construction Projects Limited as our main contractor for 40 Broadway.” Their in-house focus means we can produce a high-quality scheme.”
Henry Construction Projects director Mark Henry: “We look forward to providing a high-quality scheme in a prime location.”
£400m London office tower on stilts approved
Original Source: Go-ahead for £400m London office tower on stilts
Foster’s 518,000 sq ft building is split into four sections and lifted 18m above ground on steel columns and bracing.
Colechurch House, a £400 million office-led, mixed-use plan near London Bridge Station, will include a theatre, shops, a restaurant, a bar, and a gym.
Work will begin early next year after planning permission.
During planning, Mace acted as a construction consultant for CIT, the project’s development manager.
The ultra sustainable project replaces a 1960s office block with a 22-story stepped profile.
A highly optimised façade, mixed-mode ventilation, and photovoltaic panels will cut energy usage.
The plan aims for 55% CO2 savings relative to UK building stock and outstanding BREEAM and Platinum Well ratings.
Southwark Playhouse will open a multi-story venue below the park.
A new lightweight footbridge will replace the current brutalist bridge and London Bridge Walk.
Steve Riddell, Partner and Head of Development at CIT, said: “Designed jointly and prioritising social and environmental wellness, the net zero development will also benefit Southwark through a new theatre space, public park, and major employment generation.”
The new lightweight footbridge will increase commuter access after considerable community participation.
The project strengthens CIT’s commitment to the region. This year, it got authorization to build a significant medical and life sciences development near Colechurch House.
It will be one of the first buildings in the BioMedical Hub on the London Bridge Campus and part of SC1, London’s new Life Science District.
How are Scottish builders doing this fall?
Original Source: Gordon Nelson: How are Scotland’s local builders faring this autumn?
During our most recent meeting of the FMB’s Scotland Board, the contrast between insurance premiums and increasing company overheads with the picturesque surroundings of Speyside struck me. Meeting in person and beyond the core belt established productive conditions on Scotland’s third longest river.
Everyone is feeling the cost-of-living pressures and the UK’s 40-year high inflation rate. How are Scotland’s builders doing? Are workloads decreasing?
These issues were discussed, with feedback from Shetland, Stornoway, Kingussie, and Scotland’s central belt. Most reported a good pipeline of work and volume of queries in our Q2 status of trade poll for Scotland. Local building companies struggle to convert inquiries into work.
Early in 2021, price inflation and longer lead times for major construction components ravaged the industry. Our members weren’t alone in experiencing poor profit margins and difficulty pricing for future work. The FMB lobbied the UK government to decrease VAT on home improvement work to support local builders who employ tens of thousands of people across the UK.
The UK government’s 0% VAT on energy-efficient home items is a welcome but limited (to Great Britain) and temporary (until 31 March 2027) measure. Reduced VAT on RMI work will promote demand and hurt shady builders. What about insurance costs and business overhead?
I interviewed Sadie Philips, director of FMB’s construction and building insurance services. Sadie said that contractors’ liability insurance premiums have climbed by 50% in the past two or three years. For professional and reputable building contractors, this is another increase in business overheads. Professional Indemnity Insurance premiums have risen.
What can be done to bolster reputable building enterprises that employ qualified tradespeople under rising overheads and a tightening client base? Mandatory licensing for building firms would discourage fraudulent trades and protect clients. Licensing could boost our sector’s reputation and the quality of the built environment.
Summary of today’s construction news
In today’s construction news, it seems that, according to the CLC’s Product Availability working group, inflation will be a significant problem for structural engineers and construction professionals in 2022. All of these concerns were exacerbated by the rising price of raw materials and the expense of labour.
Additionally, Kier’s revenue from construction fell by twenty percent as a result of postponed projects and ceased work; as a result, infrastructure is now the company’s primary focus. Revenue in the range of £4 billion to £4.5 billion, operating margins of 3.5%, and maintaining a sustainable net cash position are the objectives set for the company for the next three to five years.
In addition to that, after Erith is done tearing down the existing buildings, Henry Construction Projects will begin work the following month. In 2018, Tellon was granted approval to construct an eight-story office tower with 135,000 square feet of flexible space. Terraces with views of St. James’s Park are included in the development. Ben Hamburger and James Burchell established Tellon Capital in 2014.
Furthermore, the super sustainable building takes the place of a stepped 22-story office tower from the 1960s. In comparison to existing UK buildings, the strategy intends to reduce CO2 emissions by 55 percent while also achieving excellent BREEAM and Platinum Well ratings.
On top of that, is there anything that can be done to help legitimate construction firms that actually pay their workers a living wage in the face of growing costs and a shrinking client base?