In today’s news, we will look into the Grid Capacity Is the Barrier to Net-Zero Energy in the UK Construction Sector. Meanwhile, the construction industry needs to prepare for further capacity constraints. On the other hand, it is anticipated that the construction industry in the UK would improve by 12% in 2024. Furthermore, students attending colleges in Warwickshire were the first to benefit from an innovative construction work experience academy. Moreover, building in Edinburgh came in at number three on the list of most costly cities in the UK.
Grid Capacity: UK Construction’s Net-zero Barrier
Original Source: Grid Capacity: UK Construction Sector’s Roadblock to Net-zero
UK construction industry electrification is rising, but grid capacity restrictions may hinder net-zero transitions.
The UK construction industry is electrifying its practices to incorporate carbon-free designs, materials, and machinery. However, due to major delays in connecting to the UK power grid, many firms are postponing their electric transformation.
Vattenfall’s Manager of Business Development, Suzanna Lashford, says most enterprises’ grid connections won’t be enough to power net zero operations. This requires either adding a second grid connection or increasing power. Both options strain the local electrical system, which causes capacity issues.”
The National Grid warns that 600 projects with 176 GW of energy will wait in queue for 64GW of connected capacity in England and Wales. In a recent press conference, Ofgem CEO Jonathan Brearley called the backlog “simply not acceptable,” noting that 20% of generation capacity in the transmission queue will wait 10 years for their offered connection dates and 40% have been offered dates beyond 2030.
Static electric journey
The construction sector emits 39% of worldwide greenhouse gas emissions, including 28% from operational use (heating, cooling, and lighting) and 11% from embodied emissions (materials and building processes). Grid capacity constraints are preventing enterprises from decarbonizing the sector and delaying millions of pounds in private investment. While slowing the UK energy sector, which contradicts the government’s renewable energy ambitions.
“Wider plans to improve capacity and reduce delays are needed for the UK to meet its targets. “Connections would need to be looked at on a regional basis to enable the UK to analyse demand and place generation close to demand to help stabilise those local areas,” explains Suzanna Lashford.
The National Grid’s Electricity System Operator (ESO) has made it simpler for projects to leave the queue without penalty after UK firms complained. To eliminate “zombie” projects, a two-stage connecting process and tighter queue management are being implemented. However, these reforms will take a decade to take effect, and many developers will continue to experience delays.
An Independent Network Operator (IDNO) can provide power to developers who cannot afford longer timescales or higher grid connection fees. These Ofgem-regulated businesses work with ICPs to reserve grid capacity for free on behalf of their clients and contribute to the costs of designing and building an electrical network through an Asset Adoption Value (AAV) payment, which can significantly reduce the developer’s total capital cost.
IDNOs can make AAV payments to discount capital expenditure. DNOs cannot. Vattenfall IDNO has partnered to power a new 46-acre food park in Norfolk with an enhanced grid link and a new 132kV substation to provide 30MW of import capacity and 50MW of export. Lashford says the AAV helped finance the £4.5M renovation and provide a return on investment for this client.
Vattenfall will offer a construction company and consultant webinar on “Cost-effective grid connections for the construction sector” on July 5 at 11am. The workshop will include ways to speed up grid connections, IDNO partnerships, and AAV payments.
Construction Must Anticipate Capacity Constraints
Original Source: Construction must plan for a further crunch on capacity
Pablo Cristi Worm writes that construction capacity is being strained by skills shortages, diminishing outputs, rising costs, and insolvencies.
According to the Bank of England’s current predictions, the UK may have averted a technical recession. However, the construction sector is not relieved. High insolvencies, decreasing construction demand, and rising interest rates are putting capacity under pressure.
Sales of ready-mixed concrete, bricks, sand, and gravel are declining. They show a 12.3% drop in new orders in Q1 2023 compared to the previous quarter and 14.3% from last year. This reduction is witnessed in almost all sectors amid rising borrowing costs and material and labour costs.
Repair and maintenance (R&M) work drove a 4.9% rise in construction output in Q1 2023 compared to Q4 2022. Following the pandemic, private housing R&M has increased, and retrofit projects are rising due to government subsidies and energy efficiency mandates.
Over the quarter, new work output fell 1.9%. The Construction Products Association (CPA) expects output to drop 6.4% in 2023, down from its prior 4.7% figure.
Lack of skilled workers
Even with this decreasing demand, capacity will likely be a sector issue in the near to medium term. Schedules and personnel costs are impacted by skilled worker scarcity. Meanwhile, decreased output and increased expenses are hurting contractor margins. Construction insolvencies increased 9.7% in Q1 2023.
Due to these conditions, Turner & Townsend Q2 2023 Summer UK Market Intelligence report upped real estate tender price inflation projections to 3.7% for 2023 and 2.7% for 2024.
In the face of these challenges, some may slow investment in hopes of better conditions. The plan is risky due to a weak medium-term economic forecast. Focusing on programme planning and project controls can reduce uncertainty.
To prepare for future issues, procurement should examine more collaborative contracting frameworks, risk proportioning, and supply chain capability. To monitor and deliver projects, digital strategies are also needed.
UK Building to Rise 12% in 2024
Original Source: UK construction in 2024 predicted to improve by 12%
Glenigan anticipated a 12% UK construction rebound in 2024 in June 2023, giving the industry hope.
Glenigan predicts a 12% growth in UK construction in 2024 and 3% in 2025. This news is encouraging for the UK construction industry after two years of sluggish economic growth and increased interest rates.
In light of construction’s issues, its UK Construction Industry Forecast 2023-2025 predicts the industry’s future. After an 18% fall in 2023, the industry is in dire economic straits.
Growth may slow UK construction slump.
The Office for National Statistics reported that UK construction output declined 0.6% in April 2023, raising concerns about job demand.
Despite a recent industry decrease because of material and personnel shortages, Glenigan is more hopeful about the near future. As UK economic growth returns, project-starts should increase in 2024. The report predicts a rise in family expenditure and business investment.
Major capital project delivery will also impact industrial activity over the projection period. The analysis states that delaying HS2 development will lower sector workload during this time.
Glenigan acknowledges the industry’s tough year. Before improvements begin, “stalled” UK economic growth and higher interest rates will reduce private sector investment and housing market activity.
Following last October’s mini-budget and rising lending rates, project starts plummeted, the report said. Starts declined 38% in the first four months of 2023 compared to 2022. Starts are projected to stabilise in the second half but be 18% lower than last year.
The post-pandemic project-start rebound slowed in 2022. Glenigan expects project-starts to rise from 2024 as UK economic growth returns, underpinned by household spending and company investments.
Glenigan says supply-side issues are diminishing. It argues that more pricing consistency in the next months will give clients and contractors more certainty when budgeting and planning projects during the projection period, notwithstanding high material costs. After some rough months for construction workers, it’s good to see hope.
Glenigan Economic Director Allan Wilen told KHL Group: “The pattern of UK construction activity is being reshaped by economic slowdown and structural changes, while new regulations are transforming how projects are delivered. We’re still in a condition of tremendous uncertainty, and the sector is in for a rough year, but there’s hope.
Logistics, office and retail refurbishment and fit out, and repurposing disused commercial spaces are projected to benefit from structural improvements. Over the next three years, firms will need to be flexible to discover these development areas and capitalise on new opportunities.
Warwickshire College Students Receive Their First Construction Job Experience Academy
A Banbury-based carpentry contractor led a hands-on work experience academy for Warwickshire college students.
Seven WCG (Warwickshire College Group) students from Moreton Morrell College and Rugby College completed LJ Construction’s “Site Ready” course, which ensures students get site-based experience before entering the workforce.
Two Level 2 Site Carpentry students are working on LJ Construction projects as self-employed carpenters after the seven-week training.
LJ building, founded in 1985, has about 150 employees and works on medium to large building sites in central England.
At its Banbury headquarters, the company has established a training facility where students can learn site-based skills like stud walls and spiral stairs.
The facility teaches site manager assistance, waste management, and power tool proficiency.
LJ Construction gave all course participants a tool set and helped them earn their Construction Skills Certification Scheme (CSCS) to work on a construction site.
LJ Construction, which already employs a WCG apprentice, offers a work experience plan.
“To have these types of relationships with a progressive business like LJ Construction can make a world of difference to our students’ employment prospects,” said WCG Industry Placement Coordinator Louise Hugill.
“Working and learning in a college workshop is very different from using those skills on site. The LJ Construction training course simulates a live site and gives students a safe start.
“It is fantastic that a number of the students have now been taken on as trainees and fast-tracked into the industry due to WCG’s partnership with LJ Construction.”
LJ Construction aims to expand its “Site Ready” project to train more regional carpenters.
LJ Construction trainees are paired with a mentor for on-site growth.
“We visited a range of colleges and it became apparent that a key barrier to employment was a lack of work experience and there was a clear desire from tutors to overcome that challenge,” said LJ Construction Director Ryan Jones.
Our construction academy courses aim to prepare students for site work.
“We welcome Level 2 students who are nearing graduation and need work experience to enter industry.
We prepare them for a mini-site. We welcomed 10 students to the programme, and several have started working as self-employed carpenters on our sites, which is great for us, the college, and most importantly, the students.”
The UK’s Third Most Costly City to Build in is Edinburgh
Original Source: Edinburgh ranked third most expensive UK city to build in
According to a new analysis, skills shortages in UK cities keep construction costs high.
Turner & Townsend ranks Edinburgh third most expensive to build in the UK.
It was the 32nd most costly city to construct globally, whereas Glasgow ranked seventh nationally and 37th internationally.
Inflation, skills shortages, and high interest rates will keep UK construction under pressure for the next year, the professional services group stated.
Its market assessment shows London as the most costly UK city to develop at £3,136 per square metre. However, the capital has dropped out of the top 10 and is now 14th in the world.
Manchester and Edinburgh are the next two most expensive UK markets, with average expenditures of £2,504 and £2,425 per sq m, respectively.
Due to a strong US currency and green government subsidies, Atlanta and Tampa have outperformed UK markets.
In 2022, UK building costs rose 9.4% across nine markets. In 2023, supply chain pressure will lessen and demand will fall, lowering inflation to 3.6%. Higher interest rates will raise project financing costs.
Construction employment fell 1.9% in the first quarter of this year due to a skills shortage that drives up labour prices.
The UK construction workforce costs £36.50 per hour, ranking fourth worldwide.
Government spending, especially on healthcare, education, and infrastructure, secures the future pipeline of work and opens property development opportunities, according to the report.
Turner & Townsend UK managing director for cost management Martin Sudweeks said: “Exceptional growth in US markets has seen a relative shift in the UK’s global ranking of the most expensive places to build.
Summary of today’s construction news
Overall, we discussed how the building sector in the United Kingdom is going carbon-free by electrifying its methods. However, many businesses are putting off their electric transformation because of significant delays in connecting to the UK power grid. Meanwhile, skills shortages, falling outputs, rising expenses, and bankruptcies, as reported by Pablo Cristi Worm, are putting a strain on the construction industry’s capacity. Additionally, Glenigan estimates growth of 12% in the UK construction industry in 2024 and 3% increase in 2025. After two years of weak economic growth and increasing borrowing rates, this is good news for the UK building industry. On top of that, seven students from Moreton Morrell College and Rugby College, both part of the WCG (Warwickshire College Group), have just graduated from LJ Construction’s “Site Ready” course. Founded in 1985, LJ Building is a medium-to-large construction firm operating in central England with around 150 employees. Moreover, new research suggests that construction costs in UK cities remain high due to a lack of qualified workers. According to Turner & Townsend, Edinburgh has the third highest construction costs in the UK, it scored 32nd worldwide in terms of construction costs, while Glasgow ranked 7th in the UK and 37th worldwide.