£19.6bn is a lot of money.
This is EDF’s latest cost estimate for its nuclear new-build at Hinkley Point C – more than £1.5bn more than the French energy giant had previously expected.
EDF also warned over the risk of a 15-month delay to the project’s first phase, alongside a potential nine-month hold-up to phase two.
But despite possible delays or cost hikes, for contractors working on the scheme, it seems to be a case of focusing on the positives rather than any negatives.
NG Bailey chief executive David Hurcomb this week declined to comment on whether the M&E package being delivered with Balfour Beatty had seen cost increases. He said the JV was still “working up budgets” with the French energy giant.
Instead, he focused on the fact that the works were finally kicking off in earnest after years of delay – with the project pushing the M&E specialist’s order book to over £1bn.
A mega-project like Hinkley getting into full swing is undoubtedly a good thing for the industry and for contractors involved. But construction firms also need to be wary of its wider impacts, as new research this week from Turner & Townsend shows.
“Contractors who can be flexible nationally will be set to reap the most reward”
CN previously revealed that regional contractors were looking at changing building designs in the South-west to mitigate the impact of Hinkley, with firms looking at switching from steel to concrete frames as steel fixers and other trades are sucked in by the nuclear new-build.
Now, fresh research from Turner & Townsend suggests an increase in regional trades being drawn into the scheme is “creating a bottleneck for construction trades”. Contractors in the region are now expecting tender prices to increase by 2.8 per cent in 2017, according to the report.
Turner & Townsend managing director of UK cost management Paul Connolly adds that new city deals and strong regional pipelines will only add to the changing regional picture in the coming months and years.
“Birmingham and Manchester in particular are emerging as attractive alternatives to the capital, reporting a stronger market outlook than city regions yet to agree a devolution deal with central government,” he says. “With large volumes of work coming forward in these regions, tender conditions are strong, with contractors experiencing less competition and a general movement towards price growth.”
Importantly, however, the research highlights that a one-size-fits-all approach to procurement isn’t the way forward for clients working across different parts of the UK.
The consultant points out that contractors in the West Midlands are operating at 92 per cent capacity in Q1 this year, well ahead of the national average of 84.3 per cent, while contractors in Yorkshire report they are at 85 per cent capacity. This means that as more projects come on stream in regional markets, clients will have to think carefully about procurement routes to manage what capacity is available across the UK.
And it also means that contractors who can be flexible nationally will be set to reap the most reward – being able to adjust capacity quickly will be vital to take advantage of expanding regional pipelines.