Autumn 2010 Meeting

in conjunction with the University of East London
 
Summary (1 of 3)
The Autumn 2009 meeting was held in conjunction with University of East London on the 25th. The theme of the event was focused on the industry response to the new UK coalition goverment targets.
 
The day began with a welcome and introduction by Peter Rebbeck (Construct IT Chair), which was followed by a brief update on recent Construct IT activities by Professor Farzad Khosrowshahi (Director Construct IT) and Dr Jason Underwood (Manager Construct IT).
 

Terence Boniface (Department for Business, Innovation and Skills) followed by providing a keynote. He began by stressing there would be no discussion on BIM or IT, before going on to outline the agreement by the coalition government to be the ‘greenest government ever’ and that this would be achieved via a number of strategies, including: increasing on the EU reduction; energy from renewable sources; establishing a full system of feed in tariffs for electricity; a green investment bank and the ‘green deal’.

 

In terms of spending, good and bad news issues were highlighted around some projects having been shelved but others, such as the high speed rail, having been given the ‘go ahead’ and the need to get a balance between the supply of affordable housing, without ignoring the green issues.

 

Terence also highlighted the challenge posed by the strategy of restricting spending without affecting sustainable growth; both economically and environmentally.

 

He then discussed the Low Carbon Transition Plan initiated in July 2009, that aims to set out how the UK will achieve the targets from the Climate Change Act to cut CO2 emissions. Terence outlined that this is being driven by the Low Carbon Construction Innovation and Growth Team, which was established by the previous government, who are responsible for ensuring the construction industry is 'fit for purpose' in terms of  delivering a low carbon future. He informed that their interim findings emerged in March 2010 and will be published on 29th November 2010 through an industry, NOT government, report. It was highlighted that this report will provide recommendations/challenges to both industry and the government based on 18 propositions to be taken forward and implemented. Terence stated that this, in many respects will provide “a business plan for the construction industry over the next 20 years”.

Following the keynote, Richard Lyle (KPMG) focused on providing an industry outlook in relation to the current economic and political climate. Richard began by highlighting some of the key issues that have led to the current economic situation emphasising that the financial system is more likely to become unstable the longer there is economic stability, as economic agents take on more risk.

 

He then discussed that as the recent recession has been the first totally synchronized global recession, the impact has made it much harder when compared to previous recessions. Furthermore, those more service-oriented economies such as the US and the UK were not hit as hard as manufacturing economies. Annual growth forecasts and potential future growth in terms of labour costs; competiveness of the UK, GDP growth, manufacturing output; and UK unemployment growth were discussed before the risks to a sustained recovery were outlined.

 

Taking a construction industry perspective, Richard highlighted that the construction sector has witnessed an increase in output but decreases in both new orders and on government spending. He suggested that the outlook is deteriorating, particularly in public housing and other works. In terms of housing, Richard stated that the sector took the biggest hit from the Comprehensive Spending Review (CSR) along with a sharp drop in mortgage approvals, while house prices remain historically high. Rents are falling in the industrial sector and the prospects for growth in 2011 are limited. He stated that the balance in the commercial market has been more quickly established and that commercial asset prices are beginning to find a level. In terms of infrastructure, Richard highlighted that contractors are being asked to reduce their costs and while there are central government cuts, there will still be some construction work.

 

Richard therefore stressed that the construction industry needs to be changing its focus, looking outside the UK into regions where there is potential growth. Richard concluded that 2011 and 2012 are likely to be the low point for the industry with most large businesses predicting raised revenues but increased margin pressure. Therefore, he suggested that businesses will need to concentrate on diversity (geographically or service), alternative funding models, mergers and acquisitions, and performance improvement through ICT... more>