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NOUGHTIES REVIEW: Public projects come to the rescue

CN looks at how key markets fared in the first 10 years of this millennium, and what the future holds

Commercial

Commercial building in the UK thrived in the noughties on the back of 16 years of uninterrupted economic growth for the country.

In 2007, commercial construction orders totalled £17.5bn. But, following the boom, nearly half of the recessionary fall in the construction industry’s output has come from a £9bn drop in commercial work.

A lack of private sector investment has stifled office development; however, the market is expected to pick up again in the new decade, with existing office and retail supply dwindling and credit availability picking up.

Retail

The completion of new shopping centres reached a peak in 2008, with 14 major new schemes finishing and the British Council of Shopping Centres describing the year as “retail property’s busiest in almost two decades”.

But the recession stopped many plans in their tracks and while some developers have started showing improved confidence, projects are not expected to start trickling into the pipeline until 2011.

Supermarkets such as Tesco and Sainsbury’s have had multi-billion pound expansion plans in recent years – and are expected to keep spending for the foreseeable future, although margins remain tight.

Housing

In July 2007 the Government set a target to build three million new homes by 2020 – roughly 240,000 per year. At that point the UK was building 175,000 new homes a year on the back of more than a decade of growth in the housing market.

Two months later mortgage giant Northern Rock approached the Bank of England for a bailout and in the recession that followed the number of new homes fell to its lowest level in 88 years, with just 70,000 set to be built this year.

But a white knight has emerged in the shape of the Homes and Communities Agency, which is expected to build around half of the 260,000 new homes over the next two years.

Education

In 2005 Tony Blair’s Labour Government lived up to its “education, education, education” mantra and launched the biggest overhaul of the secondary school estate since Victorian times.

The £55 billion Building Schools for the Future programme to rebuild or refurbish every state secondary school in England had a troubled start, but has come to represent a valuable source of work during the downturn.

Although the public purse will come under pressure in the next few years, BSF will continue to offer significant contracts. Partnerships for Schools has also appointed 15 contractors to a £4bn academies “super-framework” to carry out educational and related projects over the next four years.

Transport

The roads sector has seen major advancements in procurement with the Highways Agency’s introduction of  Early Contractor Involvement contracts through the A500 Stoke pathfinder scheme, awarded to Nuttall in 2001.

The end of the decade has seen several big PFI deals come to fruition with financial close on the £6.2bn M25 contract in May 2009 and the £2.2bn Birmingham highway maintenance PFI deal on the cusp of completion.

This model has the potential to define the next decade, with three local authorities already procuring multi-billion pound schemes.

Aviation, having supplied its own noughties major project in the form of Heathrow Terminal 5, is on course to play a part in the next decade with the Terminal 2 revamp under way and the third runway debate still raging.

Perhaps the most prominent contribution to construction this decade was from the rail sector, with a flurry of major projects such as London Underground’s Jubilee Line extension and the West Coast Mainline upgrade.

The fortunes of Transport for London’s public private partnerships also grabbed the headlines, with Metronet’s collapse in 2007 estimated to have cost the taxpayer £410 million.

The fate of its more successful counterpart Tube Lines could also hang in the balance, as funding disputes look set to roll on into the next decade. Arguably the biggest transport story of this decade was Crossrail, which after years of deliberation is now in procurement. But with the public purse set to tighten, the £15.9bn project will be a significant focus in the next decade too.

Energy

The Government’s energy White Paper, published in the spring of 2007, gave contractors some hope that there would soon be major power-related contracts on the table – leading to many increasing their number of specialists, particularly in the nuclear, wind and carbon capture and storage fields.

Ministers agreed a target of generating 15 per cent of the UK’s energy supply from renewable sources by 2020, a deal that was formalised last January with the EU Renewables Directive.

In summer it was announced an extra 25 GW of offshore wind energy – 7,000 turbines – would be built around the UK, in addition to the 8 GW already built or planned.

A new fleet of nuclear reactors is also in the planning, with works expected to start in 2013.

Health

The Egan-inspired ProCure 21 framework dominated the health construction landscape in the noughties. The Government launched the multi-billion pound procurement channel nationally in 2003, based on the partnering model recommended by Sir John.

The Department of Health is very proud of ProCure 21 – in 2008, 97 per cent of schemes were delivered on time and budget, and to date there has been no litigation on any ProCure 21 scheme.

More than 50 firms expressed an interest in its replacement, ProCure 21+, which will allocate work for the first six years of the next decade. Last month, the DoH shortlisted 11 for up to six spaces.