UK Construction Market Report 3Q 2024
Hot topics
Key statistics:
Workplace assistance
of respondents said they have used an artificial tool to support a workplace activity.
Building safety
of respondents think sufficient progress is being made to make buildings safer.
Digital and artificial intelligence (AI)
A slight majority of respondents (45%) say they have not used ChatGPT or another AI tool to support workplace activities. However, 41% have used such tools, an increase from previous surveys, where around a third of respondents had.
As technology firms continue to integrate AI into their products — such as Microsoft’s Copilot and Google’s Gemini — we expect this adoption rate to continue rising across the industry.
In June, the Chartered Institute of Building (CIOB) published its AI Playbook on the use of AI in the construction industry. This initiative is a welcome step toward increasing general awareness and understanding of how AI can be effectively utilised by construction firms.
The playbook also includes ways to evaluate AI’s effectiveness, while also considering important issues such as ethics, cyber security and data protection. Barriers to incorporating AI invariably exist, such as the need for upskilling, but a strategic approach across the industry ought to allow investment to follow in the right places.
Building safety
Over half (57%) of respondents believe insufficient progress is being made to make buildings safer following the Grenfell Tower fire tragedy.
Seven years on, thousands of residents still live in buildings that require cladding remediation work. The latest government statistics show that by the end of June 2024, remediation had been completed on 29% of the 4,613 residential buildings deemed to have unsafe cladding in England.
The figures highlight the need for comprehensive action from all stakeholders to mitigate the risk of further fire incidents. Indeed, fires continue to occur due to cladding, with the Fire Brigades Union calling government ministers and building firms “criminally complacent.”
The Building Safety Act gaining royal assent in 2022 undoubtedly put some remediation plans on hold until clarity emerged on new standards that would become law. The Act has opened up new routes to remediation and, crucially, funding that would have been unavailable beforehand.
While different remediation programmes are underway, disputes and failed negotiations between building owners and contractors remain all too common.
The Grenfell Inquiry’s final report, determining how the tower block became in such a condition that it allowed fire to spread, will be published on 4 September 2024.
Sustainability and waste
Tapping into investor and occupier demand for the best-in-class sustainable properties has made the “retrofit first” approach increasingly popular among developers to deliver prime developments.
However, amid cost pressures on materials and labour, some lenders are including penalties in loan terms if plans do not contain sufficient ESG improvements. Waste can negatively impact a borrower’s ESG credentials, an issue for the construction industry, with the UK producing 59.1 million tonnes of non-hazardous construction and demolition waste in 2020.
The scale of opportunity here is highlighted by 92.6% of the material being crushed at landfill is then used in roads and building foundations rather than preserved as materials for reuse.
In response, project teams are making savings by reusing demolition materials and sourcing repurposed or recycled input materials to bring emissions below benchmark levels. For instance, reusing a building’s original steel frame where viable or dismantling and installing it at another site can enable cost and carbon savings.
Clay bricks can be reused rather than crushed and recycled as aggregate material. Indeed, exposed brick is now seen as a desirable material among design teams looking for character and stylistic flexibility. While the latest NPPF consultation seeks to remove references to “beauty” and “beautiful” to give planning authorities more discretion, well-designed places are still a policy in the National Design Guide and National Model Design Code.
A prime example of preserving and amplifying original materials such as brick is the Grade II listed Park Hill in Sheffield, which has been shortlisted for this year’s RIBA Stirling Prize.
On a larger scale, the Paris 2024 Olympics is another example of using fewer resources — 95% of competition venues are pre-existing or temporary. The Aquatics Centre is the only purpose-built facility, and 3,000 seats are made from locally recycled plastic. The design also includes a wooden concave roof with minimal construction height and uses bio-sourced materials.
AI and climate change
The proliferation of AI as a catalyst for constructing new data centres is an established trend, but at what cost to the environment?
Google’s 2024 Environmental Report shows a 13% year-on-year increase in its greenhouse gas emissions from AI and data centre energy consumption. This is despite investments in its technical infrastructure, highlighting the challenge of reducing emissions while supporting increased computing demand from AI.
In 2023, Google’s total data centre electricity consumption grew 17% despite maintaining a 100% global renewable energy match.
The report also cites the typically longer lead times between initial investments and construction of clean energy projects and their resulting emission reductions.
Despite this, Google believes AI has the potential to help mitigate 5–10% of greenhouse gas emissions by 2030.
Electricity is a key focus for AI and data centres in becoming less power-hungry. Energy systems are the largest contributor to greenhouse gas emissions, at 35%. Electricity systems are rich in data and the sector is beginning to envision next-generation smart grids driven by AI. Machine learning, for instance, can contribute to the research, deployment and operation of smart grid technologies.
Whether through accelerating the development of renewables or improving forecasting and monitoring of their use, as AI’s capability grows, the transition of data centres to low-carbon electricity sources should accelerate.
Moving away from fossil fuel use in powering both is all the more vital when total electricity consumption from data centres could double from 2022 levels to 1,000 TWh in 2026, according to the International Energy Agency.
Last month, Elon Musk announced xAI’s “Memphis Supercluster”, which will become the world’s most powerful AI training data centre. Housed in a 750,000 sq ft facility, it will contain 100,000 Nvidia H100 GPUs for training and running Grok — xAI’s next-generation large language model. A second cluster of 300,000 B100 GPUs is scheduled to come online next year.
However, electricity supply constraints mean portable power generators are required on site. Although these use natural gas for fuel — cleaner than coal or oil — they still emit carbon into the atmosphere while operating.
Technology firms clearly have a stake in reducing their carbon emissions for operational efficiency. While governments committed to triple the world’s renewable energy sources by 2030 at last year’s COP28 summit, further agreements and collaboration between various stakeholders will be necessary to invest in clean energy projects to accommodate data centres and produce innovative clean energy solutions.
Construction bonds
Concerns over project viability have increased following news that insurance firm QBE Europe is to cease writing new construction bonds.
QBE currently provides bonds for 20 of the industry’s 30 biggest contractors and will continue providing cover for smaller firms up to £1.5 million.
Contractors' clients typically require a performance bond covering 10% of the contract value to ensure that the contractor complies with its obligations to undertake works in accordance with a contract. Performance bonds are also used as a safeguard against insolvency, a critical issue for the industry in recent months, with providers tightening conditions in response.
Supply chains will likely be more selective when choosing contractors, looking for financial stability and conducting due diligence checks. They may also require lower levels of cover if other guarantees are available. Indeed, as ever, the decision to obtain a bond will require a cost versus benefits analysis.
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