In normal circumstances the construction industry is a bellwether sector for the wider economy and it’s not difficult to work out why. When homes, offices, factories, and roads are being built, it’s the most visible sign of confidence in the economy because people are funding their construction for others who are willing to pay to live in them, use them or employ people to work in them. But circumstances are nowhere near normal, and they haven’t been for some time. Just as the effects of Brexit are starting to kick in, the stop-start impact of the Covid pandemic has made predictions about the health and even the direction of the construction industry – and the wider economy – extremely difficult to make. Just as new figures appeared to show signs of supply shortages easing, Omicron emerged, threatening to scupper any progress made in unblocking bottlenecks. Added to that are soaring energy costs – with warnings that fuel bills could rise by 50% by the Spring ­– which have contributed to inflation rising to levels not seen since the start of the 1990s. With those external pressures bearing down on the sector, it’s understandable that forecasters are expecting material shortages to drive up tender prices this year and next. According to global construction consultancy Mace, UK tender prices are expected to be 4.5% higher this year, compared with last, and 2.5% higher than it predicted last September. While Mace expects inflation to slow next year, tender prices will be 3.5% higher than in 2022 and even the elimination of Omicron and the smoothing of Brexit related road bumps are unlikely to alter that. The main short-term issue for the construction industry continues to be widespread material and labour shortages, which is driving price growth. Last month Arcadis warned that rising energy costs could push construction tender prices up by between 4% and 5%. News from the Timber Trade Federation (TTF) at the start of the month that timber supplies and costs are expected to stabilise – due to more regular demand for housing and imports increasing to pre-pandemic levels – will be of little comfort. Price volatility always leads to delay and inaction, as project sponsors and developers hold off on inviting tenders, more in hope than expectation that the picture in six months or a year will be clearer. Contractors across the UK have already had to contend with rising tender prices caused by higher material costs, with some projects being halted and retendered. According to the Chartered Institute of Procurement and Supply’s latest snapshot of 150 construction companies across the UK, many are reporting delays to decision making by clients, contributing to the slowest sector growth for three months. There was some good news with the number of firms reporting supplier hold-ups falling from 47% in November to 34% in December, as fewer shortages of building supplies improved delivery times, but there’s no guarantee that trend will continue. However, those forecasts don’t take account of measures that can be taken by the industry or government to assist. As the recent vaccine rollout demonstrated, we are at a stage far in advance of where we were at the start of the pandemic in dealing with and working through the pandemic. Business resilience and continuity plans are more developed, allowing companies across the supply chain to work through the imposition of restrictive measures with less disruption. Last year companies were hampered by the triple whammy of fuel supply, lorry driver shortages and supply chain delays while also dealing with the impacts of Covid, Brexit and labour shortages. Many have learned from the experience and put in place contingencies to ensure those factors can be dealt with more efficiently and expeditiously. As costs for fuel, energy, labour, and materials rise, bidders are altering their commercial assumptions, insisting on more flexible change control provisions in contracts, with clearer and more detailed clauses that reflect the potential for external factors to cause disruption and delay. Amid this uncertainty cost consultants are proving their worth by providing valuable insights into likely market rates and supply trends as well as offering advice on cost saving and adding value to projects. Governments are playing their part with the commissioning of public sector infrastructure projects and long-term housebuilding targets. Governments at Westminster and Holyrood have long championed small-to-medium sized enterprises (SMEs) enjoying a greater share of public procurement business but this needs more urgent attention. It’s clear from research and anecdotal evidence that SMEs find the public procurement process challenging and many need additional support with bid submissions. Brexit and the Covid pandemic have introduced changes to the way everyone does business and the construction industry is no different. Given its importance to the economy, it is monitored and used as a gauge of how the wider economy is performing and the message, we should be sending out is that the future can be a lot brighter than current statistics suggest. Ryan Gilluley is managing director of GCM Ltd, a Lanarkshire-based firm of cost consultants, claims and disputes experts for the construction and engineering sectors.

Research from London lettings and estate agent, Benham and Reeves, has revealed that it’s not just London house prices that have climbed considerably in recent times, with the total paid in council tax by London homeowners and tenants hitting almost £5bn a year – £1.2bn more per year compared to just five years.  Last week it was reported that inflation has surged to a 30 year high and with gas and electricity costs set to climb higher yet, the cost of living has become increasingly difficult for many.  Those living in London already face some of the highest house prices and rental values in the nation, with the capital also home to the highest household expenditure and this squeeze on affordability has no different when it comes to the amount of council tax they pay.  Household council tax costs The research by Benham and Reeves shows that the average Londoner pays £1,374 in council tax per year, up 26.8% in the last five years,  Richmond is home to the highest council tax cost per property at £2,065 per year while Southwark has seen the largest increase over the last five years at 36.8%.  Total council tax costs In total, London’s current council tax bill is a huge £4,993,798,878 per year based on the average cost per household and the total number of dwellings across the capital.  Barnet is home to the highest sum of council tax paid on an annual basis, with £258.5m paid across the 146,730 homes in the borough. Croydon is also home to one of the highest total council tax bills at £252m per year, followed by Bromley (£225m), Ealing (£195m) and Lambeth (£1782m).   But it’s not just the increasing cost of council tax per household that is pushing up this total, in the last five years an additional 150,000 homes have been built within London which has contributed to a £1.2bn increase in the total sum of council tax paid across London.  Tower Hamlets has seen the largest annual increase in council tax costs over the last five years, with the total sum paid per year increasing by 48.6%. Southwark (45%), Barking and Dagenham (41.4%), Lewisham (41%) and Croydon (38.9%) are also amongst the boroughs to have seen the largest uplofts in the total sum of council tax paid.  Director of Benham and Reeves, Marc von Grundherr, commented: “Council tax is one of the core costs that many homebuyers fail to consider when looking to buy a home and the sum owed each year can differ drastically depending on where you choose to live.  Much like our home insurance or energy bills, it’s also subject to change and the average London homeowner has seen council tax bill increases squeeze their cost of living by a further £300 a year in the last five years alone. So it’s an important one to consider when it comes to the ongoing affordability of your home, as unlike an expensive phone contract or comprehensive TV package, it can’t be dodged.” Data on council tax costs per dwelling sourced from Gov.uk: Live tables on council tax Data on total dwellings in each borough sourced from Gov.uk: Live tables on dwellingsTotal council tax bill and change based on the current average cost of council tax per dwelling (2021/22) multiplied by the total number of dwellings vs five years previous (2016/17)

Property developers and intermediaries will collectively waste over 14,500 days searching and applying for loans in 2022, predicts development finance comparison site, Brickflow. Brickflow co-founder and head of lending, Ian Humphreys, says while it traditionally takes around 70 hours to search for lenders and complete a development finance application, his tech platform helps users perform the same task in 20 hours or less. Ian estimates developers and intermediaries spend nearly a third of their time searching for development finance; Brickflow uses algorithms, searching over 120 data points across 36 lenders, presenting finance options within two minutes. Developers are able to choose their preferable lending options, use online onboarding tools and access expert help, where necessary, to complete applications which can be sent to up to five lenders in the deal forum’ (similar to a competitive tender). Conversion rate from Heads of Terms to completion is over 90%. Ian comments: “Development finance lending topped £9.3 billion in 2020 and if we assume an average loan figure is £4 million, it equates to 2,325 development finance applications taking 50 hours longer than necessary. When you divide this by an 8 hour day, it’s a staggering loss of time. “Add to this the frustration of nearly one in three SME house builders citing a lack of finance as one of the biggest barriers to progressing projects and it’s clear Brickflow is a no-brainer.” He concludes: “According to YouGov research, saving money and spending more time with the family are popular New Year’s resolutions for Brits so I’m pleased we can help people achieve this.”

This month Andrea Fawell, Sales & Marketing Director of award-winning property developers Kebbell, gives us a very honest account of the market factors that are likely to affect house buyers and housebuilders in 2022. What are the biggest factors impacting the property market at the moment? The long term impacts of problems with the global supply chain and the availability of materials and labour means it is increasingly difficult to build to a normal time scale and I can’t see that changing for a while. Brexit has meant the loss of many European site workers in particular, there is a huge HGV driver shortage and the costs of container ships bringing materials and finished items in has dramatically increased. Procurement departments are desperately trying to get materials to finish off homes. There is also not enough stock on the secondhand market. We are hoping that people can have the Christmas they didn’t have last year and will then put their house on the market because until there is more secondhand stock there is almost an over demand for new homes which is a funny thing for a housebuilder to be saying! Prices are not currently changing but developer’s margins are being squeezed with a 15-40% increase in costs of materials. There are roughly six month delays at some of our developments, but for some developers I understand there are delays of 12-18 months. Supply is simply not able to meet demand, even more so having had such a buoyant market post lockdown. All these factors are having a huge impact on deliverability and the cost of building. Timescales are stretching beyond what can be programmed for, so it comes down to managing expectations of the delivery of new homes. How is the current market for new home-buyers? It is a very difficult time for home-buyers. I have been in the industry for 36 years and I have never seen anything like it. People are committed to buying and to moving home, intensified by the pandemic, but developers simply can’t deliver to normal timelines or even promise when they will definitely be able to deliver because of all of the shortages. Homebuyers are still reserving anyway! Purchasers are frustrated but grateful that we are being so transparent and up front about the market problems. We are constantly looking for solutions and alternatives and we are keeping buyers in the picture with what is happening. Last week we had tiles stuck in a Liverpool port and further supplies stuck in Felixstowe. Neither port had the staff to get the tiles off the containers and there weren’t any lorry drivers to get those materials to site. We sent a van to Liverpool to retrieve the tiles and when they arrived, they were all broken. The purchasers had to choose a different tile that was available. We are in this together. By having a collaborative approach homebuyers trust and work with us but it is a huge upheaval in their lives with many having to go into temporary accommodation whilst developers wait for the right parts to come in. Once they put their own homes on the market, in their heads they have already moved out. Are there any landmark trends or announcements coming up in the industry in 2022? The new Deposit Unlock scheme which has piloted for over a year will start to be a consideration, especially as this will be the last year of the Help to Buy scheme which ends in March 2023. I think part exchange will be increasingly attractive as it means you can stay in your house until the new home is ready for you which is the solution to the delays being seen across the industry. Assisted Move, will continue to help new home buyers sell their property and developers pay the agents fees if they want to sell their house in the shortest time possible. How are housebuilders tackling sustainability? In preparation for my trek across the North Pole in April 2022, I recently went on a trip to stand on Europe’s biggest glacier in Iceland and I was blown away by the impact of climate change. We need to be all over this as an industry and championing sustainability, heightening awareness and being mindful of green credentials and what we need to do to play our part. Small changes add up. We don’t put in wood-burning stoves because it has an unnecessary carbon footprint. We work very closely with sustainability consultants across all disciplines from looking at what is going into our skips to sourcing the best ground source heat pumps, but it is hugely complex, there are no easy solutions and there is a lot of work to still be done as an industry. We face a lot of difficult conundrums about sustainability. For example, will existing homeowners be able to afford and physically put in air source and ground source pumps in their current homes? It is easier for new builds to have these planned in but whilst we are trying to future proof, the technology is moving so fast it is hard to keep up. Our commitment is everyone will have a car charging point or an ability to fit a car charger but in Norway wireless chargers are being piloted so in say two years’ time will we charge our cars wirelessly in which case will car charger ports be obsolete? Or is the future actually hydrogen powered cars? The industry can and must do better, but it is far from easy. Are off-plan sales growing? The nature of our developments next year means we are able to offer off-plan sales for our new developments; Milestones, an 18 luxury apartment development in Ascot and Meadow Court in Iver which comprises 39 two and three bedroom apartments. As a result, we are prioritising sophisticated online marketing tools such as html experiences, interactive screens for colour choices, and many more. We are investing in the online experience that we think will