A year that started with the industry still mired in recession moved towards cautious optimism. Contractors went from worrying about the lack of work to worrying about the lack of skills to do it as optimism rose over nuclear, rail, roads, housing and commercial.
- Change at the top
- Housing leads charge
- Blacklisting rumbles on
- Treasury talk
- Contractors in first gear
- HS2 battle rages
- M&A bonanza
- Painful losses
- Headline acts
As 2013 dawned, the construction industry was practically still in January, hunkering down in a cold, wet month that set the tone for what was widely expected to be another year of misery.
But while the industry and the wider economy continued to suffer, with no sign yet that George Osborne’s austerity plan was working, government ministers gave themselves a pat on the back for managing to stay together, ‘renewing their vows’ at the mid-way point of their electoral term.
Infrastructure was at the heart of its new pledges and would remain high on the political agenda, with policies on housing, roads spending, energy and rail all coming up for intense debate.
Energy was the word on everyone’s lips throughout the year. While the government talked up the Green Deal after its ‘launch’ in January on the one hand, it continued to deal with the aftermath of a messy attempt to rein in Feed-in Tariffs on the other, as the High Court battle against their reduction raged on.
As the year progressed, the rising cost of energy bills became the defining political battleground of 2013.
This should have been an opportunity to promote and explain the potential benefits of the Green Deal. But the government failed to do so and energy minister Greg Barker had to defend the coalition’s flagship energy-efficiency scheme all year.
Meanwhile, the start date for the UK’s first new nuclear plant for a generation, Hinkley Point C, got repeatedly pushed back as talks over a strike price threatened to become talks over a strike-out price. Finally though, in October we got a deal.
EDF’s chief executive Henri Proglio and energy secretary Ed Davey lined up for the cameras, smiling, shaking hands and looking forward to a ‘nuclear renaissance’.
Critics said the UK had paid too high a price.
But at least it’s definitely going ahead - assuming EDF makes that all-important final investment decision and the £14bn facility passes EU state aid approval from the European Commission.
Change at the top
At the start of 2013, KMPG warned top contractors to restructure and centralise procurement to survive. Within months, Balfour Beatty and Wates had shaken up their leadership structures.
Meanwhile Anna Stewart took the reins as chief executive at Laing O’Rourke from Ray O’Rourke, who retained his role as chairman.
We recognised his great contribution to the industry by placing him on the Construction News Awards Roll of Honour in July.
Laing O’Rourke made good progress on the Cheesegrater tower at Leadenhall, but the nearby Walkie Talkie, built by Canary Wharf Group, was re-nicknamed the Walkie Scorchie after the sunlight it reflected started melting cars.
The City of London approved a new office nicknamed the ‘Scalpel’. Google confirmed the location of its new UK hub and in the process let everyone know that King’s Cross, an area which has seen significant new investment, was a place where the biggest and brightest might like to set up shop.
In January, Sir Robert McAlpine landed the first contract under the much-delayed Priority School Building Programme. It was, however, a slow year for schools, with little progress on the use of the new private finance 2 scheme and delays to the school Property Data Survey.
Housing leads charge
For much of the year, margins were the worry keeping contractors awake at night, starting low and not improving.
But housing was a different story. The major housebuilders competed to see who could produce the most impressive margins and profits.
This offered confidence to an industry otherwise still beset by financial woes - that is until the media and politicians looked at these profits, then at the severe shortage of housing, and decided ‘landbanking’ needed examining.
Boris Johnson, the normally shy and retiring mayor of London, urged developers to “get on with it”.
He would end the year by saying everyone needed to take “collective responsibility” for the housing shortage in the capital.
In between he visited just about every Crossrail station where a cameraman showed even a flicker of interest.
Incoming chief construction adviser Peter Hansford confounded doubters by publishing the industrial strategy, Construction 2025, on time in July.
The document was sensible and set a template for action, with a council of leading figures chosen to drive its implementation. We’re still waiting.
Cranes became front page news this year, albeit not for the right reasons. Tragedy struck when a helicopter hit a crane in Vauxhall on a foggy morning in January, killing two people.
Blacklisting rumbles on
The stain of blacklisting continued to linger throughout 2013, some four years after The Consulting Association was raided and closed down. Contractors eventually set up a compensation fund, which has yet to pay out.
Labour and the unions made increasingly loud calls for an inquiry, while sites across the UK were picketed by unions.
The Scottish Affairs Committee hearings heard evidence from organisations including the UK Contractors Group, whose director Stephen Ratcliffe was slammed for giving evidence that reflected “badly” on the industry, according to MPs.
Cullum McAlpine was another notable witness. The non-executive director of Sir Robert McAlpine admitted the contractor had used The Consulting Association when working on the Olympic Park, though it had “not operated or sought to operate a blacklist”.
Workers’ fight to be informed of their presence on the blacklist carried on.
Crossrail denied Unite claims over blacklisting on its project, while Balfour Beatty admitted to using a blacklist on the Olympic Park. The controversy doesn’t look like ending anytime soon.
In 2013, the chancellor decided Construction News was a good way to get his message out, speaking to us twice in the space of six months.
George Osborne said he wanted to see businesses around the world base themselves in Birmingham and the West Midlands, rather than Shanghai or Bangalore.
Chinese firms took the invitation literally. They came here to look around, liked the look of the place and started investing all over the country.
Spanish contractors also wanted a piece of the action. Ferrovial doubled its presence in the UK with the £385m purchase of Enterprise before winning Transport Scotland’s £415m bundled roads package in August.
Pension funds didn’t find quite as many schemes to like.
But as the £20bn the chancellor said they would invest in UK infrastructure failed to materialise, the government found new friends in the insurance industry, which went even further than the pension funds, waving “up to” £25bn in front of our eager noses.
UK Guarantees took off, as the government tried to intervene to stimulate the market. None of the schemes have been built yet, but the initiative has been widely praised as one of the better government policies to emerge.
Contractors in first gear
UK contractors continued to pick up work, but the big guns seemed to be operating with the handbrake on. Morgan Sindall, Kier and Balfour Beatty all restructured when profits fell.
Most insisted they were being selective over jobs. The importance of frameworks and repeat clients became the oft-repeated mantra for chief executives.
Clients encountered difficulties as well. The Highways Agency had trouble awarding some of its asset support contracts as bidding irregularities forced something of an impasse.
The Pinnacle failed to get past its stump and went back to the drawing board, where it has stayed ever since.
HS2 battle rages
High Speed 2 survived a High Court challenge in March - but that was just the start. Most companies wished they were busier during the year; HS2 Ltd was not one of them.
Budget estimates for the project ranged from ‘around what Crossrail is spending annually’ to ‘keep going until you reach £70bn and then keep going’. Politicians argued, routes were changed. Costs were increased. Politicians argued.
Sir David Higgins was appointed as the incoming chairman and was immediately wheeled out to every broadcasting outlet in the nation to reassure.
Most recently, Construction News revealed the first work packages that will be tendered next year and the hybrid bill was published - all 55,000 pages of it.
Still, transport secretary Patrick McLoughlin proved that transport secretaries aren’t just for Christmas, and managed to avoid the perennially rotating door at the Department for Transport, which had seen eight departures in eight years.
Other ministers were not so lucky. A forlorn-sounding housing minister Mark Prisk, 51, tweeted that he was “disappointed” that he’d been asked to step aside for “a younger generation” (namely Kris Hopkins, 50), while Jack Dromey made way for Emma Reynolds who took over Labour’s housing brief.
Nick Clegg continued to look like he knew he’d left the oven on but didn’t want to own up.
Lord Deighton started his work as the new infrastructure minister. Labour pointed to Sir John Armitt’s review as the blueprint for future infrastructure; Downing Street stayed silent.
Mergers and acquisitions continued, the most high-profile of which was Kier’s acquisition of May Gurney, outmuscling Costain’s bid to create a new £2.8bn turnover powerhouse.
Kier chief executive Paul Sheffield highlighted the combined firms’ strength in the regions following the deal. That was to assume there was any work in the regions to pick up (he insisted there was).
Payment terms came under the microscope as main contractors signed up for reverse factoring, trumpeted by the prime minister the previous year.
SMEs cried foul - though plenty signed up - and Carillion asked subcontractors to agree to 120-day terms, though it insisted nothing was mandatory.
This didn’t stop its rivals citing 120-day terms in interviews at any given opportunity.
SMEs struggled. Some blamed the late payment culture; others pointed to low workloads.
Whatever the cause, PwC figures showed 625 companies went out of business in the first quarter alone, bringing the total to more than 5,500 in two years.
Sir Frank was described to Construction News as a man with a passion for recruiting young people into an industry he was proud of.
Concerns over skills grew over the year, with contractors asking themselves where they would get their skilled workforce and what more should be done to attract young people into construction. By the end of 2013, skills shortages began to dominate the discussion ahead of work shortages.
By June, four Green Deals had been signed. People didn’t celebrate.
All sorts of things get found on construction sites, but, hand-on-heart, Construction News subeditors never expected to use the words ‘medieval knight discovered’ in a headline until the team working on Edinburgh’s Old High School gave them the opportunity.
Despite their efforts, they were possibly trumped by a 1,900-year-old perfectly preserved Roman sculpture of an eagle that showed up on a McAleer and Rushe site in London in October.
Winners of the big jobs were revealed by Construction News: Bam Construct took the £300m Google headquarters; Thames Tideway got going with shortlisted JVs for its £2.3bn deals; Thames Water named its £3bn alliance partners; Skanska took the £500m Scalpel; and the firms building £4bn of priority schools were all revealed on cnplus.
The government welcomed a new governor of the Bank of England and then wished they hadn’t rolled out the red carpet when Mark Carney started talking about shifting gear “into neutral” to prevent a housing bubble.
That didn’t stop the chancellor announcing more incentives to get housing going as recently as last week in the autumn statement, including paying homeowners not to appeal against developments in their own backyard.
Amid all the talk of Help to Buy increasing housing demand (though not necessarily providing enough of an incentive to get supply going to the extent needed), the mood started to lift in the last four or five months of the year.
Workloads increased. Regions such as Manchester warned of having more work than people to get the jobs done. Contractors in the London commercial sector said they were going to be more selective of clients, rather than the other way around.
Construction News designers had to remind themselves that arrows were allowed to go up (as well as down), and we put a glass half-full on the cover.
Sentiment shifted, in a profound way, very fast. And while many are still suffering from what has been a horribly turbulent time for the industry, hope is growing that 2014 will be kinder.
A new year beckons, and it could be the best we have had in a long, long time. An election looms, so expect to see plenty of politicians in hard hats at a site near you. The Green Deal might even take off. But maybe don’t put your house on it just yet.