UK Construction Market Report 4Q 2023
Hot topics
Key statistics:
Digital and
artificial intelligence
of survey responses have had at least some experience of using Chat GPT to support a workplace activity, up 7% from our Summer survey.
Reinforced Autoclaved Aerated Concrete (RAAC) crisis
of survey respondents believe the RAAC crisis has caused reputational damage to the industry.
Modern methods of construction (MMC)
of survey respondents believe the government will focus on traditional methods rather than MMC.
The RAAC crisis
The public sector currently finds itself in the face of an immediate crisis. In September 2022, the Office of Government Property issued a ‘Safety Briefing Notice’ stating that RAAC panels are now life-expired and liable to collapse.
RAAC panels were a modern method of construction with main uses in floor wall and roof panels. It grew in popularity throughout the 1960s and 1970s, allowing the rapid construction of buildings, such as schools and hospitals, compared to more traditional methods.
The panels are made of an aerated lightweight cementitious material with no coarse aggregates, making them much lighter and easier to mould than traditional concrete — their lack of weight results in a less durable product with a 30-year lifespan. The panels have been described regularly in the mainstream news as bubbly and crumbly and upon visual inspection, it is evident why.
As many buildings containing RAAC panels are now 50+ years old, the issues are becoming apparent. The porous nature of the product makes the panel more prone to water ingress, which can cause the steel bar reinforcement to rust and degrade over time. In old buildings where old pipes begin to leak, problems can occur, which are often only visible with an intrusive survey. In turn, panels will creep and deflect, causing fracture and collapse.
Another common issue occurs in roof panels where there is a lack of reinforcement bearing onto the wall structure. Survey evidence has highlighted that during installation, builders have cut ends from ‘off the shelf’ planks to fit the dimensions of structures. In doing so, the transverse bars which anchor the end of the reinforcement have been cut away, causing significant negative impact to the structural performance of the panels.
NHS England commissioned Loughborough University to undertake surveys and research of the panels and its existing portfolio. Findings show that some 10,000 panels make up the roofs of some NHS hospitals. Building reported an astonishing 38% of England’s 64,000 school buildings have passed their design life. With the National Audit Office revealing an estimated 700,000 pupils in buildings that the Department for Education believes require major work, the challenge is huge and expensive but does present an opportunity to build back better.
A popular solution, where panels have not yet failed, can be to retrofit a steel angle or timber bearing at areas of risk. The UK government has now implemented a programme to survey public buildings and remove or strengthen them where necessary. NHS England, on the other hand, is committing to a full eradication agenda.
Many RAAC panels, regardless of when installed, continue to perform well where installation met the manufacturer’s recommendations. Surveys and record information show they exist in lots of public buildings over 50 years old, which should be subject to periodic monitoring. The onus moving forward will fall on building owners and operators to address their maintenance operations to track conditions.
Anecdotal feedback suggested that some people outside of the industry negatively perceived the construction industry following the news of the crisis. However, just over half (53%) of our survey respondents said the situation had not affected the industry’s reputation.
Instead, some comments received suggested that the government’s reputation was affected due to long-term underfunding and a lack of maintenance and checks.
The National Audit Office’s conditions of school buildings report highlighted a significant funding shortfall in recent years, contributing to deterioration across the school estate. The Department for Education calculated £7 billion a year as the best practice level of capital funding needed to maintain, repair and rebuild the school estate. Instead, it received an allocation averaging £3.1 billion a year of funding from HM Treasury, including finances to build 500 schools over a 10-year programme.
The School Rebuilding Programme is behind schedule. In the summer, Construction News reported that as of March 2023, there had been just 24 contract awards against a target of 83, with the National Audit Office highlighting the delay to programme forecasts was largely a result of the supply chain declining contracts due to inflation risks and market volatility.
MMC/modular construction
Despite the advances over the best part of a century, MMC remains laced with challenges in a traditional industry and some recent negative press only makes these hurdles even higher.
This summer brought the news that three schools, all built using modular units by Caledonian Modular, were advised not to reopen for the autumn term due to issues with poor workmanship impacting the structural integrity of the buildings.
Surveys of the schools determined that the buildings had not been built in accordance with the design; therefore, safety could not be guaranteed. This situation proved a painful reminder that modular units can be constructed to relevant standards and meet performance criteria in a warehouse but will ultimately only succeed if the quality assurance follows through to the onsite construction stages.
Although the issues are frustrating in the drive for MMC adoption, fewer survey respondents thought the government would focus on traditional methods than thought it would, with overall the benefits of MMC outshining the potential risk of problems, which could also come up with conventional construction methods.
Digital and AI
A slight uptick in respondents this quarter compared to the last one — 28% and 21%, respectively — say they have used Chat GPT or another AI tool in their workplace. We expect this trend to continue growing at pace over the coming years in construction and other industries.
In supporting comments, respondents once again state that construction companies risk getting left behind by competitors and other industries if they do not embrace AI.
The awareness of products such as Chat CPT is a starting point for the industry. The majority of respondents, 67%, saw a lack of knowledge about AI’s potential uses as the biggest barrier to implementation. Encouragingly, contractor respondents to our survey not being aware of Chat GPT fell markedly this time to 12% from 35% last quarter.
There are examples of contractors increasingly using digital capabilities to benefit projects and improve efficiency.
AI-driven tools and software are accelerating growth by automating workflows in nearly all stages of the construction lifecycle – from pre-construction design to reducing waste.
Funding from the Department for Science, Innovation and Technology has helped projects such as TradeWork’s AI-assisted project management systems to enable more efficient work scheduling, resourcing, budgeting and completion, resulting in more efficient housebuilding.
AI can also assist with post-completion maintenance. Contractor AmcoGiffen recently signed an exclusive distributor agreement to use HyperTunnel’s robot underground construction technology in the rail sector. The partnership will enable robotics and automation to enhance, monitor and repair track infrastructure.
Climate emergency
The need for adapting construction methods and ensuring buildings are environmentally sustainable to tackle the climate emergency continues to grow.
COP28, running from 30 November to 12 December, is set to reiterate the warnings and key challenges that need overcoming for the construction industry to quickly ensure it can play its part in reducing global temperature rises, improving energy security and reducing inflationary pressures on consumers.
Ahead of the United Nations (UN) negotiations later this month, a peer-reviewed report from 50 leading scientists published in the journal ‘Earth System Science Data’ says human-induced warming reached 1.26C in 2022 and increased at an ‘unprecedented rate’ of more than 0.2C per decade in the 2013-2022 period.
Reforms often need government buy-in, which has been scaled back in the UK in recent weeks. Nonetheless, industry bodies are taking the initiative.
Examples include the RICS launching a manifesto in July to inspire a roadmap for the built environment in the lead-up to the next general election. Titled ‘Empowering a sustainable future’, the document sets out 10 actions for creating a sustainable built environment while also demonstrating to the government that RICS members stand ready to work in partnership in achieving its aims.
The manifesto follows last year’s policy recommendations in the institute’s Decarbonising UK Real Estate report, which emphasised the importance of reducing the stubborn rate of embodied emissions in construction and addressing the lack of regulation if the UK is to meet its net zero targets.
With embodied and operational carbon emissions from the built environment accounting for 30% of the UK’s total, according to the report, choices made in construction and retrofitting actions at the earliest stages are vital in reducing emissions occurring later.
For instance, minimising waste helps avoid emissions embodied in unnecessary materials and energy. Likewise, careful design choices from the outset can help minimise resources needed.
To that end, the Royal Institute of British Architects (RIBA) has created a series of guides on designing sustainable buildings and the latest RIBA Plan of Work embeds and encourages sustainable design strategies at each work stage. The addition of coordinating smart building technologies and specifications is set to launch later this year.
Elsewhere, the Chartered Institute of Building (CIOB) recently launched its Guide to Sustainability in the Built Environment. It offers practical tools and strategies to help construction professionals embrace sustainable practices through the planning, construction and operational stages of a building lifecycle.
The construction and real estate industries, therefore, have an abundance of resources and determination to tackle the climate emergency. Wherever public sector impetus or support may be lacking, the embracement by construction firms of industry guidelines and standards will be crucial.
Second staircase grace period
The government recently announced a transitional period of 30 months before developers are mandated to implement a second staircase on new residential developments measuring 18 metres (six storeys) or taller. This will commence from the date the government publishes and confirms the changes to Approved Document B — the government’s building guidance covering fire safety.
During this period, new planning applications can conform to either the former or updated guidance requiring second staircases.
Schemes built in the 30-month transition period under the old rules would need to commence within 18 months of the Approved Document B publish date before resubmitting an application complying with the new regulations.
Devil in the detail
Developers have been seeking clarity on designs that are compliant with the new regulation, with some stating that schemes are being withdrawn from planning applications until there is more guidance rather than risk planning refusals.
Others are redrawing plans entirely to ensure compliance – one example being Berkeley Group revising its 1,300-unit Oval Village scheme.
In his statement, Michael Gove indicates that the Building Safety Regulator is working to agree on the design details going into Approved Document B.
Whether developers and investors are comfortable going ahead with single-staircase buildings during this transitional period remains to be seen. Financing projects deemed by the government less safe than those containing a second staircase may be considered as too risky a proposition.
Conversely, a second staircase can adversely affect the profit level or even the viability of a scheme by decreasing the saleable area at a time when project budgets are already stretched with high interest and inflation rates.
Further discussions on section 106 obligations to accommodate subsequent changes to floorspace or viability are likely. Developers and local authorities will need a pragmatic approach to concessions and contributions, ensuring that housing delivery can continue in a safe and unabated manner.
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