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Construction Parliamentary Update

A round-up of all the construction news from Westminster this week, brought to by the Madano Partnership


British Land has announced that it has closed and drawn funds on a $480 million US private placement bond issue, the largest US private placement transaction by a UK Real Estate Investment Trust. The placement, originally launched at $200 million, was three times oversubscribed with British Land subsequently choosing to increase the issue to $480 million. The range of maturities is between 7 and 15 years, and there are 12 investors. The financing has an average life of over 11 years and was swapped to £300 million at an average floating rate of 146 basis points over LIBOR. British Land took bids and priced the placement on 22 June, signed on 3 August and closed and drew funds on 1 September. After drawing funds and repaying revolving bank facilities, the Group’s weighted average debt maturity and interest rate, including share of JV and fund debt, is 9.7 years and 4.8%, respectively. (8 September)

The Green Investment Bank advisory group is due to meet for the first time on Tuesday this week. The advisory group will operate for 18 months, during which time £775 million, raised from the sale of High Speed 1, will be released with another £2.225bn to follow by 2015. The Green Investment Bank will play a vital role in addressing market failures unlocking significant new private investment into green infrastructure projects. It will work to a ‘double bottom line’ of both achieving significant green impact and making financial returns. It will also operate independently and at arm’s length from Government, which will agree its strategic priorities. (7 September)


A new report by a group of MPs into private finance initiative projects has become the second in a matter of weeks to criticise the state of public sector procurement. The report entitled ‘Lessons from PFI and other projects’, published by the Committee of Public Accounts, says the public sector is getting a bad deal out of PFI, and that the taxpayer’s position is made worse by “poor transparency of investor and contract information alongside patchy public sector commercial skills”. The committee has also said that private investors are making excessive profits and using off-shore accounts to avoid tax, and has called for HM Treasury to employ freedom of information powers to investigate. (1 September)


The National Trust has turned down the offer of ministerial talks to discuss the detail of the National Planning Policy Framework until government issues a clarifying statement. Trust representatives met planning minister Greg Clark to discuss the draft NPPF. Speaking after the meeting National Trust director general Fiona Reynolds said: “(Mr Clark) invited us to engage now in dialogue about the detail of the NPPF document. “While we welcome this, we’re not prepared to enter into such talks until we have a clear statement, from the highest levels of government, clarifying that the planning system is not there principally to promote economic development. (7 September)


The Department of Business, Innovation and Skills has said public procurement was characterised by “ineffective industry engagement, poor and inconsistent communication of goals, short-termism, perverse contractual incentives, over-specification in tender requirements and a lack of seniority and capability of procurers”. The BIS report, Infrastructure supply chains: Barriers and opportunities, added that clients were failing to engage construction suppliers early enough in the process. (7 September)

Tender prices are set to fall for another 12 months before finally recovering in early 2013, according to new research. The last quarterly report by consultancy EC Harris, which tracks tender prices in the UK property and infrastructure sectors, predicts the slow recovery in the UK, Europe and US will continue to affect construction workloads and keep the pressure on contractors. The report forecasts that prices will fall nationally by 1.1 per cent in the year to the second quarter of 2012, before finally rising by the first quarter of 2013 by 0.5 per cent. It says when schemes do go to market contractors are prepared to make “considerably greater savings” to get the job and secure workloads. Margins will also be hit by increasing material costs. (7 September)

Construction new orders have fallen to their lowest level since 1980, according to new figures from the Office for National Statistics. The volume of new orders totalled £9.5 billion in the second quarter of 2011, 16.3 per cent lower than the first three months of the year. Orders were down 23.2 per cent compared to Q2 2010. Housing orders were down to £2.7bn from £3.1bn, but despite falling by 14 per cent over the quarter they remain 4 per cent up on the second quarter of 2010. Private industrial was the only sector showing positive growth over the quarter, climbing 6.6 per cent to total £521 million. However orders were down by 10 per cent on the same period last year. Private commercial was down by more than £150m. Infrastructure saw the largest year on year fall, of 43 per cent, while public sector orders to hit their lowest level since 2001. (2 September)


Shop vacancy rates have stabilised at 14.5% during the first half of this year but the gap between the best and worst performing towns has widened, the latest research by The Local Data Company has found. The review of shop vacancy figures of more than 1,000 retail centres shows that the threefold increase in vacancy rates since 2007 has been halted, but in extreme centres, one in three shops is vacant. Cementing the north-south divide, all southern regions were found to have an average vacancy at or below 11% while the Midlands and North range from just under 13% in the East Midlands to 16% in the North West. The top 10 worst-performing large centres are in the West Midlands and the North while seven out of the top 10 best large centres are in the South. (8 September)


New inquiry set to focus on steps the government will need to take to ensure UK’s housing needs are met, The Communities and Local Government Committee has called a new inquiry into the financing of new housing supply in the UK. The new inquiry is set to focus on steps the government will need to take to ensure that resources are available to meet the nation’s housing needs. The committee inquiry will consider both the private sector, in the context of current and likely ongoing restrictions on the availability of mortgage finance, and social and affordable housing, particularly in the context of the government’s affordable rent policy and the reduction in grant funding. (6 September)

Affinity Sutton has conducted a pilot study, FutureFit, on 102 of its 56,000 properties to assess the effectiveness of the Government’s proposed Green Deal. Under the government proposals, residents would be given cash to retrofit their homes. The cost of which would be repaid from savings on energy bills. However, the pilot found that just 4.8% of respondents were prepared to sign up for the works. There was a further 23% dropout from sign-up to works completion. There have been hopes that the Green Deal would help to replace the renovation work which will be lost when the Decent Homes programme comes to an end. But Affinity Sutton has said there must be an intense awareness programme to make residents take note. (September 2)


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