The Week That Was - 9 December 2022
Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.
Rules on onshore wind farms to be relaxed
Rishi Sunak has announced a consultation on relaxing rules that have had the effect of banning new onshore wind turbines in England following pressure from his party. Under the new proposals, planning applications for wind farms would be successful if they could demonstrate local support and address concerns of negative impacts that had been identified by local communities. Those in favour of onshore wind farms point out that they would strengthen Britain's energy security at a time of heightened prices, as well as being one of the cheapest forms of generating electricity.
Current rules on onshore wind farms mean that new onshore wind farms can be prevented if there are any local objections. These rules have led to only 16 new turbines being granted planning permission in England between 2016 and 2020; a drop of 96% compared to 2010-2015.
Further information can be found here.
Construction firms have 'tightrope to walk' amid uncertainty
According to the S&P Global/CIPS UK Construction Purchasing Managers’ Index, business expectations fell again this month. The index was down to 50.4 in November, dropping from 53.2 in October, and is now at its lowest level for two-and-a-half years. Readings above 50 signal expansion and those below indicate contraction.
Respondents to the survey stated that higher borrowing costs and worries over the economic outlook have curtailed construction plans.
John Glen, a chief economist at CIPS stated that "the small uplift in activity in November did little to dispel builders’ fears about the future as optimism fell to the same level as December 2008 during the last recession and to one of the same lows seen during the pandemic." Many businesses are concerned about higher costs and potential delays and have reportedly ordered more materials than they needed, with delivery times increasing for the fourth consecutive month.
Further information can be found here.
34 Construction firms entered into Administration in November
Construction News has reported that data compiled by Creditsafe have shown that 34 construction-related firms went into administration or administrative receivership in November, the second highest number since they started publishing a monthly round-up in January 2020. The highest total to date was in February 2020, where the figure stood at 36. In comparison, 19 construction-related companies went into administration in October this year, with a similar figure in each of the previous two months.
The figures include the administration of the Jehu Group and administrators at Begbies Traynor said, at the time it ceased trading, that delays in completing projects during lockdown and “subsequent cost increases” caused the circa £80m-turnover group to fold. Other firms have cited fixed-price contracts which with the rise in costs have removed their profit margin and forced them into an administration process.
Further information can be found here.
HMRC reports decrease in the amount construction firms spend on research and development
New data and forecasts released by HMRC note a decrease in the amount spent on research and development by construction firms in 2021. The amount spent on innovation is also predicted to fall by 17% as a result of supply chain disruptions caused by COVID-19.
8% of the research and development tax credit claims made for the year are anticipated to be made by construction firms.
For more information, please see here.
Brick slips being considered as a modern building solution
Alex Porter, Operations Director of Stofix UK Ltd, identifies the need for innovative solutions in a changing industry. Stofix UK Ltd specialises in the supply of brick slips. This modern building solution reduces build times onsite, reduces costs, allows for a watertight structure earlier in the project and removes the façade from the critical path for production onsite.
Brick slips are not a common building material in the UK. However, major manufacturers are now considering them as part of a solution to respond to environmental issues and a changing market. Brick slips also offer a solution amid rising costs as five can be produced at the same cost as one single brick.
For more information, please see here.
ONS Forecasts show a slow in construction vacancies which is worsened by a plummet in applications
Despite the ONS' recent study into the UK's employment market showing a decrease in unemployment, its latest findings suggest that vacancies within the construction market are slowing. The statistics suggest that the number of building and construction vacancies in the Aug-Oct 2022 quarter are predicted to return to the level of Feb-Apr 2022.
Of greater concern, however, is the fall in the number of applicants for these roles. The statistics show a decrease of 75% between March and April 2022 compared to the same months last year. This is worsened by a recent study of 4,000 students which found that 37% of 4,000 would not consider entering the building industry.
Broadbean Technology, the largest network of job boards, states that this emphasises that the UK's skill crisis must remain a focal issue for the building and construction sector which has been heavily impacted by the combination of Brexit, Covid and economic uncertainty.
For more information see here and here.
Thanks to Gareth Jenkins, Amy Taylor and Chris Wilkie for contributing to this week's edition.
Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice. We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date. You should seek legal or other professional advice before acting or relying on any of the content.