North East construction prospects due for a boost

The North East construction industry will be transformed over the next five years as a pipeline of major projects boosts the region’s prospects. In 2016, the North East construction industry suffered the biggest fall in the underlying value of construction projects starts out of any of the UK’s dozen economic regions according to Glenigan’s construction market analysis. The North East’s construction industry was subsequently rated the most unstable in the country according to insolvency body, R3, but that is all changing. In the three months to July 2018, the underlying value of construction starts rose by 14% in the North East according to Glenigan’s industry research. Glenigan’s economics director Allan Wilén says: “Workload trends proved more positive in the North East last year with a recovery in project starts materialising that is expected to be sustained going forward.” Education boost In 2017, there was a strong rise in the underlying value of work given planning permission in the education sector. This has continued into 2018. Higher education work is expected to be buoyant with £750 million-worth of spending due through the North Eastern Universities Purchasing Consortium framework, which will be used by Durham, Newcastle, Northumbria, Sunderland and Teesside Universities. The North East Procurement Organisation’s building and construction works agreement, which is being used by 18 local authorities, is also expected to produce spending of £300 million. Projects to be procured through NEPO include primary and secondary schools, libraries, fire stations, police stations and social housing projects. Housing sector strong NEPO should help improve social housing starts, which have been weak. Over the past five years, just 6,614 social housing units were built in the North East according to Freedom of Information requests submitted by ITV and published this summer. The wider residential sector is expected to be a major positive factor in rising construction starts. There are more than 184 new housing projects planned for the North East up to 2021 according to research from the Construction Industry Training Board (CITB) and the North East Local Enterprise Partnership. This research, which Glenigan worked on, identified £15 billion-worth of major projects in the region. The largest amount of planned activity will be in infrastructure and new housing, with work totalling £709 million and £574 million respectively by 2021. The report also cited significant commercial and industrial projects. These include Legal & General’s £350 million Science Central hub in Newcastle and Sunderland’s International Advanced Manufacturing Park (IAMP), which has been designated a ‘nationally significant infrastructure project’ by central government. However, the CITB cautioned about a potential skills shortage. CITB partnerships manager for the North East, Jeremy Wright, said: “This research clearly shows there’s a great deal of important construction work planned for the area over the next few years. The volume of activity is still impressive but that presents challenges when it comes to getting the right skills in place.” Despite these fears, Glenigan forecasts that the underlying value of construction project starts in the North East will rise by 21% this year and expects a similar rise in 2019.