Mixed picture in the region means a tough year ahead for contractors. By Mark Lewis
Judge it by its ability to shrug off an inauspicious start, and Nottingham must surely be the premier town in England. In Saxon times, the place was called Snotingham.
Fortunately it changed during the Norman era, and like the counties around it which make up the East Midlands (Derbyshire, Lincolnshire, Leicestershire, Northamptonshire, and Nottinghamshire) it has been evolving ever since. Unfortunately for the construction industry, the rate of metamorphosis has slowed down in recent times.
The region initially fared better than much of the rest of the country when the downturn struck in 2008. But by the second half of last year, it had begun to feel the crunch, with project starts eventually slumping 11 per cent by year end.
This year has been even more severe, according to Glenigan, with office and private housing starts weak and the year-on year value of industrial construction projects falling 14 per cent in the first five months. But Glenigan added the caveat that project starts were likely to stabilise during the latter stages of 2009.
Underlying planning approvals have contracted sharply, however, with on average, only 26 projects receiving planning approval per month during the first four months of 2009. This compares with a monthly average of 64 projects during 2007.
TheEast Midlands Development Agency (EMDA) has helped pool construction industry expertise in the region, funding the East Midlands Centre for Constructing the Built Environment (EMCBE) to help steer policy. And while Diana Gilhespy, the EMDA’s executive director of regeneration says that there are signs of recovery, it was still “too early” to predict when the market might improve.
“There has inevitably been a cooling down in the sector as a result of the recession. While there have been some signs of improvement in the housing market recently, and demand remains steady in public sector infrastructure, it’s still too early to predict when construction activity might pick up again across the East Midlands,” she says.
A series of large projects have been mothballed, including a £400 million shopping development, which have highlighted the difficulty of private works in the region. Public works continue to be the most likely sources for contractors, with EMCBE joined by the East Midlands Property Alliance and Scape, the trading arm of 13 East Midlands local authorities, in developing a framework for around 80 per cent of public capital works over the next four years.
“Public works are certainly the most productive,” says EMCBE chief executive David Walker. “Anything that is linked to the public purse is buoyed. But it is all still pretty poor.
“In broad terms we are following the depressed situation throughout the country. Maybe a little bit worse. The critical mass of opportunities is maybe a little bit worse than the more heavily populated parts.
“All the big infrastructure projects tend to be focused in and around London.”
He has been involved in trying to make sure that the capital projects which do occur in the region are procured in the most effective way. The first tier of the £300m a year framework agreement has been tied up by Wates, Kier and Wilmott Dixon. This is for projects of more than £2m. The second tier, for smaller projects is being discussed at the moment, and looks like the most promising regional bet for SMEs in and around the area.
“Scape is almost at the point where it is going to let the second tier framework which will be for capital works from £50,000 up to £2m. That will be going to more regionally focused contractors throughout the East Midlands,” says Walker.