After three consecutive months in which construction contract awards research by Builders’ Conference defied all logic and exceeded all expectations, the severity of the COVID-19 crisis has finally caught up. Builders’ Conference CEO Neil Edwards reports on the dawning of what could be the new norm.
For the past three months, the UK construction industry has channelled its inner Nero, fiddling while all around it Rome burned. And for the past two months, it seemed that defiance might just pay off as the sector delivered unprecedented levels of new contract awards: £7.8 billion in March; and £9.7 billion in April.
In May, however, the fiddling has ceased; bold defiance has given way to acceptance; and reality has bitten. And bitten hard. The resulting fall in both the quantity and the value of new contract awards in May 2020 is as severe as it is unsurprising; closing at £3.9 billion and falling just short of the £4 billion that has become the sector norm.
Sat atop a lower than usual peak is Balfour Beatty, which seized three new contract awards worth a combined £394 million. The most significant of these is a £350 million refurbishment and repair contract for Highways England as part of the A63 Castle Street improvement programme in Hull.
Following on Balfour Beatty’s heels is Berkley Group which bagged six new contract awards during the month. The largest of these is a £120 million new build contract for 756 riverside dwellings at Huntley Wharf in Reading
Boosting both the North East region and the infrastructure sector is a Costain Jacobs joint venture partnership which won a £183 million refurbishment and repair contract with Highways England at the A1 in Scotswood, Newcastle upon Tyne.
Meanwhile, the housing sector was buoyed by a £40 million new build at Stoke Giggord in the West Country. Comprising one and two bedroom apartments and two, three, four and five bedroom houses, this was one of eight new contract awards that together were worth £150 million, pushing Crest Nicholson into fifth position.
CG Fry took sixth position with a combined £149 million haul. The largest of these is an £80 million mixed use development in Shepton Mallet that comprises 600 dwellings, a care home and a primary school.
Also worthy of note is a £143 million refurbishment and repair contract for Highways England on the M42 at Solihull. This single contract pushed Skanska into seventh spot on the BCLive league table.
In all, ten companies secured more than £100 million of new contract awards during the month. Kier Group, which has an enviable reputation for winning a new contract for each working day each month, picked up just 16 in May. Just 232 companies reported new work compared to the 350 to 400 that has become the established norm.
With 171 contracts worth a combined £1.8 billion, housing accounted for almost half the monthly total of all work; while roads a subsection of infrastructure contributed almost £900 million.
With 61 new contracts valued at £596 million, London just managed to cling on to the top spot in the regional run down. However, with more than half a billion pounds in new contract awards, Yorkshire came a close second. In Scotland and Northern Ireland, new contract awards plummeted to just £128 and £4 million respectively to further underline the impact of the COVID-19 crisis.
Although there are regional variations, it appears that the industry’s resilience has finally been broken. For more than two years now – allowing for a few seasonal blips and unseasonal anomalies along the way – the UK construction industry has grown accustomed to a monthly norm of around £4 billion of new contract awards. But with the COVID-19 effect now visited upon the sector, a new norm of less than £4 billion might have just been established. A new norm in which work is more scarce and in which margins are noticeably thinner. A new norm in which enforced value engineering, re-pricing and retendering could be the order of the day.
The hope, for now at least, is that UK construction companies will have taken the time to repair the proverbial roof while the sun was shining. The dark clouds have gathered, and a storm looks to be approaching.
Quick review of BCLive table for May 2020
- 232 no companies were detailed as winning new contracts during May 2020
- 359 no new construction orders were researched by Builders’ Conference all detailed on our UNIQUE BCLive league table
- Balfour Beatty secures overall top spot with £394.1 million of new orders
- Kier Group secured most number of new construction orders in the month with 16no totaling £116.2 million
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