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Has the bubble burst?

24 Sep 19 For the first time in 19 months, the total value of new work on the Contracts League table has dipped below £4bn. Neil Edwards considers the possible causes

August is traditionally a slow month for new contract awards, but this year it saw a 25% month-on-month fall in new work coming through.  The overall value of new contracts in London dipped below the £1bn mark for the first time in ages, and the number of companies reporting new contract awards barely scraped above the 300 mark.  

Was this a seasonal glitch or was it a foretaste of leaner times ahead with a fast-approaching Brexit and the possible postponement or cancellation of HS2?

Only three companies reported new contracts totalling more than £100m in value – normally there are at least 10 that can do that – and the monthly total on the Contracts League table didn’t just dip below £4bn; it dropped like a stone to £3.18bn.

Rising to the top was Willmott Dixon, a regular on the Contracts League table but a name that seldom climbs to the very top. The company secured 10 new contracts in August worth a total of £245.7m. The largest – and certainly the most prestigious – of these is a £70m contract to build 12 new tennis courts, six indoor and six outdoor, together with associated club house facilities, at the All England Lawn Tennis & Croquet Club in Wimbledon, south west London. 

Another company unaccustomed to the giddy heights of the Contracts League table’s upper reaches, Graham Construction, claimed the number two position last month courtesy of a six-contract haul worth a combined £137.3m. The largest of these is a £65m project to convert the former Osney Power Station in Oxford into an “executive education centre” for Oxford University’s Said Business School. The scheme includes 121-bed accommodation.

BAM, in third place, picked up five new contracts worth a combined £120.8m, including a £65m job to extend Central House, in Whitechapel High Street, by adding a further six storeys to the existing five-storey structure.

House-building made up more than a third of all new contract awards last month, with the biggest contribution from Engie UK, which collected a £48m contract to build 242 new dwellings for Sanctuary Housing Association at Cooks Lane in Sittingbourne, Kent. This contract is one of eight, together worth £93.3m, won by Engie last month. 

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

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

Whether this month’s Contracts League table signals the first signs that the UK construction bubble has burst will only become clear after we see further results next month 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 signal a severe lack of ambition to our European neighbours and – worse still – to our future trade agreement partners. 

This article was first published in the September 2019 issue of The Construction Index magazine (magazine published online, 25th of each month.) 

UK readers can have their own copy of the magazine, in real paper, posted through their letterbox each month by taking out an annual subscription for just £50 a year. Click for details.

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