Forget about that re-run of The Vicar of Dibley Christmas Special, Building’s end-of-year TV guide picks out the people, stories and events that were unmissable over the past 12 months. First off, Christmas specials
Well, we’ve got there. Work’s all but done, the tinsel’s up, the tree’s been bought, and it’s time to settle down with a sherry and your bumper two-week magazine guiding you through the festive period. No, not the Radio Times – I’m talking about our special Christmas Building issue. And it’s not the next two weeks’ TV we’re going to guide you through – it’s our look back at the year just gone, displayed in the best style of viewing guides past and present, just to get you in the festive spirit.
So … it’s been quite an eventful year. Not as apocalyptically memorable as 2008 perhaps, nor as excitingly boomy as 2014, or as feel-good satisfying as the 2012 Olympic year; but a year nonetheless which has seen changes - most notably in the government - that will have a big impact on the sector for a long time to come.
It’s hard to remember now, but 2015 began with election fever, and the bookies suggesting Ed Miliband was on course to be the UK’s next prime minister in charge of another coalition government. Indeed, such was the confidence that no one party could possibly be victorious in the May elections, that when the Conservatives unveiled controversial policies such as the roll-out of the Right to Buy to housing associations, most assumed there was no chance – or even expectation in Conservative Central Office - they would actually ever be implemented. Much of the construction industry’s speculation before the election was instead about what dangers might lie in Labour’s approach to housing, where it was threatening an extension of compulsory purchase powers to “land-banking” housebuilders, regulation of private rents, or its planned mansion tax on big homes.
Of course, ultimately for the Conservatives the spring election proved a rebirth in every possible way, and the party lost no time in shaking up construction policies radically and comprehensively. Any sense that the government might prove a continuation of the Tory-Lib Dem coalition were wiped away by the summer as, one by one, sacred cows of construction policy were put out to pasture: the chief construction adviser, the zero-carbon homes policy, the Green Deal, subsidies for renewable power – all cancelled in the first four months.
Ultimately, though, most of the industry - excepting the green bits - was happy with its lot: it got a stable government, with a ferociously pro-infrastructure chancellor willing to make building things the centrepiece of his legacy as he manoeuvred to succeed David Cameron.
The economic picture (see box below) did start to darken in the second half of the year, but so far - for most - the stuttering finish to the year has not been enough to make 2016 prospects so bad that they sour the festive mood.
Downturn Abbey: A tale of the economy
The year started on a very optimistic note, with Experian raising its construction forecasts on the back of predicted rises in infrastructure output, and the forthcoming election seemingly the only thing constraining ever more robust growth. However, as the year wore on, it became increasingly clear that the lack of capacity and overheating in certain markets was beginning to have a dampening effect on growth. Rising construction prices, particularly in the London and South-east residential and commercial markets, were causing developers to put schemes on hold while they attempted to reduce costs. Intu’s redevelopment of the Watford Harlequin shopping centre was one example of a job which couldn’t go ahead when planned because of cost increases, with Bam walking away from the job.
In September, Building discovered that the value of projects on hold had doubled in the last year, but by this time bigger factors were also coming in to play: fears for the European and global economy in the face of lower-than-expected growth in developing economies, particularly China. UK developers were starting to lose their confidence in ever higher customer demand, and foreign investors were beating them on price for prime development sites.
Meanwhile, public sector construction, particularly housing, was continuing to slump. The result was three months of declining output from June ± culminating in the first quarter-on-quarter fall in construction output since the start of 2013. However, this news was countered by the industry’s continued optimism that the declines were just a temporary reverse, rather than the start of something more fundamental, as well as scepticism that the figures will ultimately turn out to be as bad as currently indicated once all the data is in.
Only Fools and Houses: This time next year housebuilders will be millionaires
It was a typically rollercoaster year in the housing market ± but one characterised much more by going up than coming back down, as the government continued to do its best to make life as easy as possible for housebuilders. It’s easy to forget, but the back end of 2014 saw a mini wobble for some housebuilders, with Miller cancelling its planned flotation on the back of poor demand, and fears the general election could spark a wider slowdown in sales. However, 2015 has seen continued steady growth in output and profits, with the struggle of some – most publically Bovis – to get workers on site to build their homes at a decent price the biggest fly in the ointment.
If the market saw steady growth, politically housing was an increasingly hot potato. The election in May saw the new majority Conservative government embark upon a series of pro-housebuilder policy changes designed to stoke demand, reduce planning regs and encourage them to build more. These included the scrapping of the zero-carbon homes policy, the proposed redesignation of all brownfield land as having approval in principle, and the replacement of affordable housing for rent with cut-price homes to buy. The last act of the government was to double funding for these new affordable homes, with George Osborne allocating £6.9bn to the sector in the Spending Review, prompting share prices to spike. However, with a continuing dearth of smaller builders, it’s unclear if 2016 will see more homes built than this year’s 135,000.
Eastenders: Chinese firms looking to cancel Christmas cheer for UK contractors
Like the Carters taking over the Queen Vic from the Mitchells, this was the year construction’s own Far East-End soap opera hotted up with the determined entry of the Chinese to the UK manor, looking for a fat slice of British building business.
Over £2bn of contracts, and China General Nuclear Power Corporation’s £6bn investment in the Hinkley nuclear power station, came to fruition after the Chinese president Xi Jinping’s state visit to the UK in October, which followed hot on the heels of chancellor George Osborne’s promotional tour to China in September.
Chinese whispers suggest that UK firms will start falling under the hammer to Chinese buyers in the near future, with Balfour Beatty this year the biggest rumour target. Chinese contractor Beijing Construction Engineering Group International (BCEGI) has already made its intentions clear with UK operations director Gavin Taylor stating: “We need to grow and you can only grow organically at a certain rate, therefore we are not ruling out acquisition.”
It remains to be seen whether the construction industry will embrace the Chinese as “faaamily” or tell them “Get outta my pub!”
Dr Who: The search to find who might build projects out
The question of exactly who will come in to rectify the growing skill shortages in the UK construction industry was top of nearly everyone’s agenda this year.
While chief construction adviser Peter Hansford called on industry firms to ™adopt a school∫ to solve the problem, growing competition for skilled workers has made staff retention a big problem even for the likes of construction giant Mace. Speaking at Building Live the firm’s executive chairman Stephen Pycroft said: “There are more and more people being nicked from Mace the same as we go out and take people from other companies.”
There are those like Balfour Beatty going through staff like the Doctor goes through companions, while others such as housebuilders are lamenting the dearth of skilled staff, which is driving up their labour costs.
A survey of the housebuilding industry by Lloyds Bank in September reported that a quarter (24%) of firms surveyed – from SME contractors to major national developers ± said skills shortages were the biggest challenge facing the industry, while over one-third (35%) also said that there was a lack of suitable candidates to fill existing and new jobs.
The government has put forth its plans for an apprenticeship levy on firms which it hopes will raise £3bn by 2020 to pay for the 3 million apprenticeships it plans to create. However, it’s not clear how many of these apprenticeships will be created in the construction sector or what it will mean for the industry’s existing training levy.
Read Part 2 of the Review of 2015 here.
Read Part 3 of the Review of 2015 here.