The value of new construction contract awards effectively halved in the space of a single month. Is it the usual seasonal slowdown; an over-reaction to the Government’s recent Autumn Financial Statement; or is it something worse? Neil Edwards, head of Builders’ Conference, looks for some light among the dark.
At any other time of the year, a near 50 percent fall in the value of new construction contract awards would be cause for concern or even panic. When that marked downshift occurs in November, however, it could merely mark the beginning of the festive break. After all, the UK construction industry basically worked right through the past two Christmas holidays while the COVID-19 pandemic raged outside. The sector is rightly due a break.
The cause of the downshift could also be that it follows immediately after the Government’s Autumn Statement that warned of tough times ahead. There are few things that give economists the jitters more quickly than a storm warning from the incumbent Chancellor of the Exchequer.
But is there something more worrying happening. Has the war in Ukraine, energy price hikes, wage increases and inflation finally come home to roost? It is too early to tell; but whatever the cause, it has had a major impact upon the league table of contract awards which barely scraped over the £3.0 billion mark for the month; well short of the £4.0 billion that it has hit or exceeded consistently for more than four years.
In a month in which only five companies reported more than £100 million in new orders to take the league table to a lowly £3.02 billion, a single project contributed just under a third of all new construction contract awards. That £1.0 billion project – known as Project Ultra – was won by Canary Wharf Contractors – and is for the redevelopment of the North Quay site. The project will deliver up to 355,000 square metres of floorspace for a range of uses that could include office and life science, residential, retail, community, leisure, hotel, co-living and student accommodation.
In second place on the league table this month was ISG, courtesy of a single £500 million project for the construction of a new Hollywood film studio in rural Hertfordshire. Known as Sunset Studios, the fast-track project consists of the concurrent building of four main hubs, comprising 21 sound stages and nine workshops as well as ancillary buildings. The Sunset Waltham Cross Studios project also includes heritage works to restore existing Grade II listed farm buildings and the creation of significant areas of landscaped green spaces.
In third position is a joint venture between Hill Group and Peabody to deliver the first phase of the regeneration of the old Ford stamping plant in Dagenham. Phase 1 will comprise 935 affordable homes together with commercial and community spaces.
Balfour Beatty claimed the number four position with a three-project haul worth an accumulated £123.5 million. The largest of these is a £108 million project for National Highways that will deliver a new dual carriageway near Manchester. The Mottram Moor Link Road is a new dual carriageway from the M67 junction 4 roundabout to a new junction on the A57(T) at Mottram Moor.
Completing the top five this month is CRH Group which picked up two new contract awards worth a combined £100 million. The most notable of these is the £50 million design and installation of a new bores treatment stream at Barsham Water Treatment works for client Northumbrian Water. The work will be undertaken by CRH Group company, Farrans (Construction).
Buoyed by that mammoth £1.0 billion Canary Wharf project, London reclaimed the top spot among the regions with both Hertfordshire (£530 million) and Essex (£234 million) further strengthening the South of England performance this month. The North West was the best of the rest with 22 projects worth just over £236 million. Meanwhile, Scotland slipped back to just £36 million.
The mixed-use nature of the Canary Wharf redevelopment meant that housing was knocked off its perch as the number one sector this month with 54 new contract awards delivering a meagre £667 million in new contract awards.
There remains a possibility that, having largely missed the past two festive breaks, the UK construction industry has just decided to slow down a bit earlier than usual. It’s also possible that the industry over-reacted to the dire warnings of the Autumn Statement and that it might settle down again in the next few months. But there is also a possibility that this might mean the good times are over; and that rather than entering a period of festive cheer we are starting a period of festive fear.
Quick review of BCLive table for November 2022
· 121 no companies were detailed as winning new contracts during November 2022
· 166 no new construction orders were researched by Builders Conference
· Canary Wharf Contractors secured overall top spot with a single contract worth £1 billion
· Kier Group just pipped Morgan Sindall Group for most number of new construction orders in the month with 9no totaling £57 million
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