Spotlight on stone cladding

The overall lead time for panellised stone cladding was 41 weeks in the third quarter, a figure that has not changed since the fourth quarter of 1999.

However, the lead time is likely to be a month or so longer for a complex facade, even if the design is well advanced, and longer still where the scheme is at concept design.

At 20 weeks, the period for procuring materials for panellised cladding, which includes approval of samples, is by far the longest required for any package.

Cladding also has a longer drawings process than all other packages, with the exception of bespoke lifts. The stone cladding element clearly demands early procurement action if programme delays are to be avoided.

The expectation for the next year is that lead times for stone cladding are unlikely to change much from their present levels.

Enquiry levels

Enquiry levels for stone cladding are now healthy, after a slight lull earlier in the year.

One subcontractor commented: "Enquiry levels are very busy – there are so many projects in the pipeline." Another said enquiry levels were "pretty good at present and have been for the past two years or so".

According to Grant Ameristone director Colin Campbell: "From mid-1999 through the first half of this year, there were many large projects available to tender." While some stone-cladding contractors noted a slight drop in enquiries in the third quarter, they are confident that this only represents a small seasonal fluctuation.

Although the market is still generating plenty of enquiries, the consensus among stone-cladding firms is that the average project size has recently diminished, with the number of projects with a cladding value of £250 000-500 000 increasing at the expense of the £500 000-plus schemes.

Precast concrete cladding contractors – an integral part of panellised cladding – report mixed orders this year.

Many experienced full production for the first three quarters but are seeing a reduction in enquiries in the final quarter. This has led to some production being taken off-line in the short term. David Walker, commercial director of Trent Concrete, said: "Tenders this year have been rather like a number 8 bus – none for ages, then six turn up at once."

The downturn in enquiries this quarter appears to be very short-term, with many already reporting full order books for January through to March, and having no capacity to take on any work before the second quarter. Some are already reporting order books half-full until August. If demand continues at this level, pressure on lead times may result.

Most stone-cladding contractors subscribe to the view that 2001 will continue to be a good year for enquiries, with perhaps an easing-off in project value through the year, before a slight reduction in activity in 2002.

Orders and workload

Stone cladding contractors have enjoyed healthy order books for the past two years. For many, existing orders offer full workloads until the middle of next year, and some report orders stretching into 2002. Most are confident that order levels will remain healthy through 2001, with perhaps a slight reduction the year after.

There is no published data on stone cladding output, but a good indication is given by the state of the private commercial sector, the destination of the vast majority of stone cladding.

The graph shows actual and forecast output for private commercial, compiled by the Construction Products Association. The figures suggest a slight reduction in output over the next two years.

John MacEachin of Szerelmey commented: "We may be at a peak in output at present; however, being one of the later trades, we are unlikely to see a drop-off in workload for some time yet." While the private commercial sector has grown significantly over recent years, speculative developments are still in the minority.

The consensus among cladding contractors is that if there is a drop in the market, it is more likely to be a levelling-off in demand than a recession. Most contractors are not increasing their workforce significantly, preferring to maintain turnover at a sustainable level.

However, this can lead to problems, as one major cladding contractor explained: "The majority of our workforce is direct labour, but occasionally we need to take on contract labour. Due to a lack of skilled installation labour, the rates of subcontracted labour have recently increased significantly."

A few of the larger stone-cladding contractors are taking advantage of their international workforce and using lower-cost overseas draughtsmen, particularly in the Far East. The internet has made this easier.

Data supplied by the Construction Products Association

Tender prices

Little has changed for some years in the cost of materials, while labour costs have continued to rise. This has led to a gradual increase in tender prices. Thanks to higher demand, margins are now at a healthier level than they were for most of the 1990s.

While tenders remain competitive between UK contractors, particularly on prestige projects worth £500 000-plus, the biggest threat comes from overseas. Foreign contractors receive export grants from their governments or the EU that enable them to compete easily in the UK market.

One major UK stone contractor remarked: "It is cheaper to buy stone from Israel and import it to the UK than to get it direct from Portland."

Another said: "On a recent major project in London, we had the lowest tender of the UK contractors but were comprehensively beaten into second place by the European contractor."

The internet has increased efficiency in sending out tender documents. Most stone contractors welcome the extra time this gives them to prepare tenders, but some criticise main contractors for sending too much information.

Others complain that electronic transfer lands the subcontractor with the printing costs – and if the architect and engineer use different CAD packages, on-screen appraisal can be difficult.

Gardiner & Theobald's tender price survey predicts a 4% rise in tender prices for stone cladding this year. Forecasts of a slight reduction in activity over the next two years are balanced by a slowdown in tender price increases, expected to be 3% in 2001 and 2% in 2002. Inflation through 2001 may keep pace with increases in labour costs, but 2002 could see margins again being trimmed to compete in a reduced market.

The international nature of the sector helps contractors to cope with fluctuations in UK demand, as the ability to deploy the workforce on overseas projects reduces the need to secure UK workload at all costs.

One claimed: "Our UK turnover could drop to 25% of current levels and we would still retain our existing labour." Next year should see stable workload for the sector. A slight downturn may follow, but will not be sufficient to warrant great concern.