Has the Bubble Burst?

The value of new contract awards on the BCLive league table dipped below the £4.0 billion mark for the first time in 19 months during August 2019.   Builders’ Conference CEO Neil Edwards attempts to understand the cause and likely effect.

The month of August 2019 saw a 25 percent month-on-month fall in new contract awards researched by Builders’ Conference & recorded on the BCLive league table during August.   Demand in London dipped below the £1.0 billion mark for the first time in ages, and the number of companies reporting new contract awards barely scraped above the 300 mark.   So was this a seasonal glitch that merely reflected an industry taking a well-earned summer holiday; or were the joint spectres of a fast-approaching Brexit and the possible postponement or cancellation of the mammoth HS2 project to blame?

In a month in which only three companies recorded new contract award totals of more than £100 million (compared to an established norm of 10 to 12), the monthly total on the BCLive league table didn’t just dip below the £4.0 billion mark; it dropped like a stone to just creep over the £3.0 billion mark to end at £3.18 billion.

Rising to the top in a possibly portentous month was Willmott Dixon, a regular on the BCLive league table but a name that seldom climbs to the very top of the heap.   Up 10 new contract awards during August 2019 to post a monthly total of £245.7 million.   The largest – and certainly the most prestigious – of these is a £70 million new build at the home of tennis; the All England Lawn Tennis & Croquet Club in Wimbledon, south west London.   That project will include the construction of 12 new tennis courts – six indoor and six outdoor – together with the associated club house facilities.

Another company unaccustomed to the heady heights of the BCLive league table’s upper echelons – Graham Construction – claimed the number two position in August 2019, courtesy of a six contract haul worth a combined £137.3 million.   The largest of these is a £65 million project to convert the former Osney Power Station is Oxford into an “Executive Education Centre” for client, University of Oxford.   The resulting education centre will be operated by Said Business School and will include 121 bedroom accommodation.

BAM picked up five new contract awards worth a combined £120.8 million during the month to claim the number three slot.   The largest of these projects is a £65 million extension to Central House in Whitechapel High Street that will see the existing four/five storey block refurbished and extended upwards with the addition of a further six storeys.

In a month that saw housing make up more than a third of all new contract awards, Engie UK collected a £48 million new build for 242 new dwellings for client Sanctuary Housing Association at Cooks Lane in Sittingbourne, Kent.   That contract was one of eight won by Engie this month that together were valued at £93.3 million and which pushed the company into the number four spot.

Although Morgan Sindall failed to retain its crown as the monthly winner of the highest number of projects (Kier Group recorded 15 with a combined value of £60.2 million), the company did collect 11 new contract awards to claim the number five position on the BCLive league table with a £92.9 million monthly total.   This includes a £25 million Category B fit out of Building A in Westfield Avenue, Stratford, East London for HM Revenue & Customs (HMRC).

London led the way regionally with 114 new projects worth a combined £841 million, although the West Midlands (£259 million), Scotland (£252 million) and the North West (£200 million) all enjoyed comparatively positive months.

The housing sector delivered 164 new projects worth a combined £1.19 billion; offices made up 70 projects worth a total of almost £557 million; and education saw a welcome upswing with 103 new projects valued at a total of £546 million.

Whether this is merely a seasonal blip or the first signs that the UK construction bubble has started to burst will only become clear when we see further results in September and when the nation finally sees some clarity over Brexit.   One thing that is for sure is that the enquiry into the HS2 project and its possible postponement will do little for sector sentiment.   Should the project be canned entirely it would be disastrous for the sector.   And, at a time when the UK is on the brink of “going it alone” will demonstrate a severe lack of ambition to our European neighbours and – worse still – to our future trade agreement partners.

Quick review of BCLive table for August 2019

309 no companies were detailed as winning new contracts during August 2019

513no new construction orders are detailed on BCLive

Willmott Dixon secure overall top spot with £245.7 million of new work

New order winners in £1M to £5M category went to Kier Group and the £1M and under category went to Russell Cawberry Ltd.

Kier Group had the most number of new construction orders in the month with 15no.

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