This morning’s heavy frost may raise hopes among many in the building
industry of a full-on White Christmas, because, at least in business terms,
everything’s turning a bit too hot, hot, hot.
I’m told that one housebuilder hailing from the Home Counties has muttered
about difficulties in sourcing London Stocks. If said developer didn’t have the
excuse of a long cold snap holding up sites, finding the bricks to build any
homes on them could become the proverbial pain in the ariss. Brickmakers, as
highlighted in my last blog, are going to have to work flat out during what has
been for several years a quiet winter in order to rebuild dwindling stocks.
Looming brick shortages aren’t restricted to housebuilders; a large national
contractor has been telling its investors “Even if you can find brick layers it
is increasingly hard to find bricks”. The latest materials stats from the
Department for Business shows brick stocks in October falling to 10.6 weeks
worth of deliveries, down by 6% on the previous month, by 37% year-on-year and
by a whopping 67% since the 2008 peak of 32 weeks.
Bricks and brickies are just one element in a tightening supply chain
highlighted last week in a report by consulting giant Aecom, which focused on
the London market. Concrete, joinery, cladding, drylining, mechanical,
electrical and plumbing contractors were also cited. (That sounds like most of
the stuff that goes into most buildings.)
This reflects rising workloads but also shrinking capacity, with some half a
million souls having left the industry since 2008. Aecom’s survey of major
players like Laing O’Rourke, Skanska and Lend Lease found that they now have
secured 70% of their budgeted orders for 2014, compared with 38% when asked at
the same point in 2011, looking into 2012.
Another survey, out yesterday from training body the CITB, shows that 42% of
UK construction companies are struggling to recruit staff.
This should inevitably lead to cost inflation and delays. Aecom puts central
London tender price inflation at 2-5% for 2014 and 3-6% for 2015. I’m no QS but,
if you ask me, even the top end of both ranges look on the light side.
Carillion’s trading statement today emphasised how selective it is in bidding
for UK construction work (but also indicating its much vaunted scaling back of
this business has run its course). Lawyers for the bigger groups will presumably
protected themselves against most litigious flack should prices and delivery
times run over budget.
Not so, possibly, for the small and mid-sized firms, that are more likely to
take any claims on the chin. I was at an annual industry drinks bash last night
that is frequented by an eclectic mix of insurance industry people and smaller
builders. One that knows about these things expressed some surprise that more
companies hadn’t failed so far; recovery is a notorious time for bankruptcies.
It wasn’t that the banks had turned feelier and touchier, he suggested; it was
that, starved of back office investment, they hadn’t yet got their acts together
to process insolvencies. And his definition of the turnover of a “small”
contractor stretched to nine digits.
So, as Dean Martin would put it, let it snow, let it snow, let it snow.
This blog appeared today on Building.co.uk
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