UK Construction Market Report 3Q 2023
Hot topics
Climate emergency/retrofitting
The effects of climate change on the UK were set out in the Met Office’s latest ‘State of the UK Climate’ report examining the weather of 2022 in the context of long-term climate records.
The report highlights how the record-breaking heat experienced in the UK last year would be regarded as cool by the end of this century. The ten-year period between 2013 and 2022 is also the warmest since UK records began in 1884.
Last month, the UK government unveiled its third national adaptation programme. New proposals in the plan include constructing new public buildings designed to deal with higher temperatures. The government wants contractors tasked with building new schools and hospitals to implement cooling such as green roofs, shaded windows and more open spaces.
However, critics say this does not go far enough. According to a report by energy consultancy Arup, all homes in England and Wales would be at risk of overheating in a scenario where global temperatures increase by 2°C.
Decarbonising our public buildings and homes
The built environment is responsible for about 40% of carbon emissions globally. At a local level, over 300 councils have declared a climate emergency, with many assessing risks and developing plans that include retrofitting homes and public buildings.
The latest Public Sector Decarbonisation Scheme (PSDS) round opens in the autumn, providing £230 million of funding between 2023 and 2025. The amount of funding available is much lower than the demand, so competition for the money is fierce, with only the best-prepared organisations having a chance of securing the cash.
Gleeds has helped clients secure significant sums in grant funding over the previous rounds of applications. We are also teaming up with other partners on the SCAPE consultancy and construction frameworks to help our clients prepare for the upcoming funding rounds.
Aside from funding, local authorities can access a new climate advice service aiming to help shape their strategies for retrofit works.
The Local Government Association (LGA), the national body for authorities in England and Wales, has welcomed this following an LGA survey that found 21% of responding councils said a “lack of data” was a barrier to tackling climate impact and service delivery.
Climate data can only go so far in helping councils understand their environmental challenges, with 93% identifying a “lack of funding and/or available finance” as a barrier faced by authorities. Ultimately, further money and resources are needed to take action on the findings.
This is all the more pertinent given some housing directors have gone on record to say decarbonisation is not a top priority due to the sheer cost and limited funding pots available.
Second staircases in tall residential buildings
Following the Department for Levelling Up, Housing and Communities recent consultation on the installation of second staircases on all new buildings — which proposed the requirement at 30 metres (10 storeys) — it was announced last month that this will now be a requirement at a lower height of 18 metres (6 storeys).
A coalition led by the Royal Institute of British Architects, including the Chartered Institute of Building, the National Fire Chiefs Council and disability rights groups, had called on the government to impose the threshold at a lower height.
Inside Housing referenced research conducted by McGill University comparing 30 international building codes found only England, Wales and South Korea lacked a requirement for a second staircase, with countries such as the United States, Ireland and Canada imposing requirements at four storeys and above.
The lower threshold also aligns with rules in Scotland where an additional staircase from 18 metres has been required since 2019. This followed a similar consultation, where the chair saw the need for an alternative in case of the failure of the first stairway and secondly to provide a route for escape if the other stairway is used for fire-fighting operations.
In the short-term, the move will likely delay schemes above 18 metres as stakeholders will have to redraw plans to ensure complicity and viability, potentially exacerbating reports of schemes being cancelled or delayed due to the uncertainty during the consultation period.
While the 18-metre stipulation might provide some of the coherence and certainty the industry was asking for, in the longer term, some practical considerations pose a challenge when drawing up new plans. For instance, ensuring both staircases are wide enough, protected adequately and separated by a sufficient distance to prevent a fire from rendering both unusable. Given the slenderness of buildings with a central core, this could be difficult to circumnavigate.
Ministers and planners alike will be keen to ensure that developers refrain from building up to 17 metres in a bid to bypass the requirement and ultimately lead to a reduction in housing units or, conversely, build excessively higher to compensate for rising costs.
Bayscape Phase 1 Residential Development, Cardiff — Gleeds provided Project Management and Quantity Surveying/Cost Management services
Artificial intelligence and data
The need for incorporating AI, data and technology into construction processes is becoming ever more critical amid the various macroeconomic, supply and demand headwinds the industry currently faces.
Firms successfully using data-driven processes are reaping the benefits of better-informed decisions, such as greater cost certainty and reliable targets. Improved efficiency and reduced costs ultimately deliver added value to clients and other stakeholders.
An RICS study on the current use of digital tools globally found that 30% of respondents do not use estimating and quantification software and 31% use it without Building Information Modelling (BIM) and a common data environment (CDE). While there is progress with the adoption of technology, barriers remain.
There is an appetite here for the RICS and other institutions in the built environment to further champion the take-up of digital adoption by providing a playbook of information — akin to existing guidance notes or professional statements — needed by cost managers and quantity surveyors to perform their functions in a more digital and integrated fashion. Embedding digital skills like data analytics in professional training will also play an essential part in ensuring widespread adoption.
Data is the foundation that digital technologies are built upon. For instance, machine learning relies on high quality and consistent data. Yet, the construction industry has a lot of inconsistent data that remains untapped, which is a major barrier to more effective collaboration.
Gleeds recently headline sponsored Project:Hack19, a two-day hackathon with participants from the construction and engineering industries. Although the goal is for teams to compete and find innovative solutions to improve project delivery, collaboration is the main ethos.
Replicating this collaboration in practice to capture and share data emanating from projects continues to be an imperative issue for the industry, as valuable information vanishes upon completion — a vacuum that the big software companies could fill.
In our survey, 50% of contractor and 56% of non-contractor respondents were curious about the further integration of AI into the construction industry and job roles, so the recognition is already there for the most part.
Supporting comments alluded to the opportunities AI can create while emphasising the need for a careful and educated implementation to avoid wasted costs and time and overcome any cultural resistance. Some also saw the opportunity to couple AI with offsite manufacturing to reduce human resource reliance and increase industry capacity.
Others highlighted concerns about losing skills to AI and that primary and secondary education is not necessarily adapting to the major shift coming.
Just over 20% of respondents have used Chat GPT or another AI tool in their workplace activities and we expect this figure to rise as it is further embraced, not only in construction but other industries too.
A slight divergence between contractors and non-contractors emerges here, as just 7% of non-contractors were unaware of the product compared to 35% of contractor respondents. Contractors who knew of Chat GPT or other AI tools deemed them a bonus if helpful but highlighted the need for widespread adoption to be effective, citing BIM as an example.
Contractors are beginning to use digital capabilities to benefit projects and improve efficiency.
ALICE Technologies and SCS JV, a joint venture between Skanska, Costain and Strabag, recently announced that they are partnering to optimise the construction of the London tunnels of HS2. Leveraging generative AI to assess options improves efficiency in the bidding and building of projects. Using the platform saved 86 working days on the Euston ventilation shaft, significantly saving overhead costs.
The Construction Enquirer also recently reported that BAM has turned to AI in a bid to minimise delays and cost overruns. Using software from nPlan on a trial of 50 projects, the contractor will be able to benefit from unbiased insight into the potential programme and cost risks to enable prompt preventative action to mitigate risks to delivery.
Announcement of revised Joint Contracts Tribunal (JCT) contracts
JCT announced in July the long-awaited publication of an updated suite of contracts in 2024, which will see the embedding of gender-neutral language, championing of digital working and updates to reflect the Construction Playbook.
Key changes include:
- Increased flexibility around the use of electronic notices and signatures.
- A new contract: JCT Target Cost Contract (TCC), with a corresponding sub-contract and guide.
- Updates for legislation, including the Building Safety Act, the Construction Act and the Corporate Insolvency and Governance Act 2020.
Pinsent Masons outlines further changes such as:
- New relevant events \ New relevant events to cover epidemics, the redefinition of ‘statutory undertakers’ to ‘statutory providers’ and updates to how ‘statutory powers’ are dealt with
- Extension of time assessment period \ The period for the employer to assess an extension of time will reduce from 12 weeks to eight weeks from receipt of particulars
- Expansion of the antiquities provision \ The antiquities relevant event will also cover unexploded ordinance, contamination and asbestos and will be a relevant matter
- Optional additional grounds for loss and expense \ The contract particulars will allow parties to select optional further events for loss and expense, including epidemics and the exercise of statutory powers by the UK government, which directly affect the works.
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