North West still scoring with public sector work

Public projects, like the Museum of Liverpool, are helping prop up workloads in the North West.

Site hoardings going up at Liverpool Football Club's new £350m stadium in Stanley Park have given a much-needed shot in the arm to the city's construction market.

Laing O'Rourke has begun preparatory work ahead of the main start on site in September. And the resolution of the long-running saga of funding for the new ground has provided a rare ray of light in a city where work is proving harder to find.

Liverpool and Manchester are the economic powerhouses of the North West. But both markets have become synonymous with the type of construction project hit hardest by the current credit crunch - inner-city flat developments.

Buy-to-let investors poured in during the years of cheap and freely available finance. But the mortgage clampdown has led to massive oversupply and the residential market virtually switching off overnight.

Luckily for contractors in the region, urban flats are just part of the construction mix. And local firms are hoping that spending in other areas will offset the dire outlook in housing.

Steve Longhurst, regional business development director at GB Building says: "Life up here is getting tougher but it is a very varied market. It's like reading the paper - on one page it is slit your wrist time then on the next page life is not that bad. It's difficult to predict what the market will do at the moment.

"There are still good opportunities in Liverpool because the market is a little bit behind Manchester. It's the same with Preston and the towns around the M60 such as Wigan, Oldham and Rochdale which have also lagged behind Manchester and we're hopeful work will start to pick up there."

Consultants in the area are noticing a distinct drop-off in schemes which they believe will start to hit contractors hard in the coming months.

Andy Rockett, regional director at Capita Symonds says: "We as consultants are in first and contractors are lagging about three months behind us when it comes to seeing the fall in workloads.

"The luxury apartment market is pretty much dire and all residential is very, very slow compared to the last four or five years when it has been very buoyant.

"The residential market is also slowing down other things and anything that needs bank funding is being hit. With commercial offices there is plenty of work in the pipeline, but schemes are taking a lot longer to emerge from that pipeline."

Widespread caution

The whole credit crunch has got developers thinking. Before they pressed the button straight away on schemes because they had end tenants but it seems that caution is in every sector now.

"You'd have to be really bullish to build residential or commercial now without up front buyers," adds Rockett. "One sector that has been extremely buoyant is hotels - but again developers are having a bit of a rethink. What was previously very profitable suddenly doesn't stack up.

"It is definitely the time to have a mixed portfolio and firms will have a problem if they are just tied to private development.

"The government is still ploughing cash into education, transport and health work where we have not seen any signs of slowing. But most of those public jobs are tied-up with framework deals so it is difficult for other firms to now get on board."

HBG Properties North West development director Clive Perrin believes the slowdown will clear the industry of inefficient firms.

He says: "This downturn will sort the wheat from the chaff and in terms of office developments you need to provide a premium product because anything that isn't top quality will struggle.

"We are just starting a new scheme in Stockport and the area has a lot of potential because it contains mainly old '70s slab offices and has been ignored for decades."

Longhurst also thinks their will be casualties in the region. He adds: "A downturn may shake out firms that were only surviving because of rising prices and after a year or two of tougher times the industry may emerge as more efficient.

"A slowdown is an alien concept to a lot of younger people in construction. I've been around a bit and worked through a few. You can't rely on rising prices to look after you any more - you need a long-term and short-term strategy."

But recruitment specialist Hays says the level of job placements is standing up well in the area because non-housing work is still progressing.

Paradise Street

Regional director James Leon explains: "Our job flow is as high as it was six months ago in terms of temporary and permanent staff. We are still really, really busy because Liverpool is boiling at the moment with jobs such as Paradise Street and Liverpool One.

"Other massive jobs like Spinningfields in Manchester mean there is still a huge demand for QSs and that has been the case for the last four-to-five years."

Leon believes that Blackburn is the major beneficiary of work spreading out from Liverpool and Manchester backed-up by a major Building Schools for the Future programme in the city.

He says: "There are huge pockets of opportunity across the North West and it is busy everywhere."

Some contractors are finding it easier to source and keep professional staff. GB's Longhurst says: "We used to have a high churn rate with young QSs but that is reducing because no-one wants to be the victim of 'last-in, first-out' if a company lays people off.

"Six months ago you couldn't get staff but that's changed.

"Finding a good architect used to be like finding rocking horse manure, but now I've had three CVs come my way in as many weeks."

North West - Total current & projected employment by occupation

Construction output by main sub-sector UK versus North West, 2007*

Senior & executive managers	520	580
Business process managers	5,090	5,220
Construction managers	20,440	21,470
Office-based staff (excl managers)	22,560	23,420
Other professionals/technical staff & IT	6,090	5,990
Wood trades & interior fit-out	30,850	33,360
Bricklayers	10,270	11,200
Building envelope specialists	9,470	10,320
Painters & decorators	14,190	15,470
Plasterers & dry liners	6,930	7,450
Roofers	3,480	3,740
Floorers	4,890	5,240
Glaziers	6,890	7,090
Specialist building operatives	3,380	3,480
Scaffolders	2,190	2,400
Plant operatives	2,960	2,990
Plant mechanics/fitters	4,330	4,130
Steel erectors/structural	3,410	3,600
Labourers	11,400	11,950
Electrical trades & installation	21,810	23,380
Plumbing & HVAC trades	16,730	18,510
Logistics	4,090	4,700
Civil engineering operatives	6,080	6,900
Non-construction operatives	28,120	22,490
Total	246,170	255,080
Construction professionals & technical staff	44,050	47,030
Total	290,220	302,110

	UK % share	North West% share
Public housing	3	3
Private housing	14	16
Infrastructure	6	6
Public non-residential	9	9
Industrial	5	5
Commercial	20	21
Housing repair and maintenance	21	19
Non-housing repair and maintenance	21	20
Note: * Figure is an estimate

Expert opinion - ConstructionSkills

Construction activity between 2008 and 2012 is predicted to grow at 1.4% with 2009 expected to be the busiest year of the forecast period. The infrastructure, public non-residential and private commercial sectors are all expected to perform strongly. Total construction employment in the North West is projected to be 300,000-plus in 2012, despite a marginal fall in output in that year.

Infrastructure, the public non-residential sector and the private commercial sector are likely to be the most buoyant in 2008 to 2012. Infrastructure should benefit in the earlier part of the forecast period from work on phase 3 of the Manchester Metrolink and an increase in expenditure on water and sewerage facilities by United Utilities. Output growth in the public non-residential sector will continue to be driven by the Building Schools for the Future programme - all three projects in Wave 1 in the North West have now started on site.

Growth in the private commercial sector was very strong in 2007 and this is expected to continue in 2008 and 2009.

Public housing output has grown exponentially over the past two years, but growth going forward is likely to be much less robust. In the private housing sector house prices began to weaken significantly towards the end of 2007, pointing to a likely fall in output in the sector in 2008. A much quieter housing market going forward is expected.

Total employment in the region is forecast to increase by 11,890 between 2008 and 2012 - a 4.1% rise. The demand for construction professionals and technical staff is expected to grow faster than that for tradespeople.

For more information visit www.constructionskills.net

The specialist contractor's view

Bob Jones, managing director, Dew Piling delivers his view on the current state of the sector.

Of course there is a credit squeeze on but we are in danger of talking ourselves into a recession.

We seem to be exaggerating the downturn for the sake of it and things aren't as bad as people believe.

We haven't seen any drop in inquiries which are as high as at any time during the last five years. Our competitors that specialise in the housing market are having a tough time but we have a very broad client base.

Only 3% of our inquiries have come from the housing sector during last three months.

The bulk of our work is driven sheet piling and the price of steel has doubled in the last 18 months. Steel is at such a high price and delivery periods so long that firms which can't purchase stock are struggling.

We have 6,000 tonnes in stock and had the foresight to make early purchases but the impact of price rises will come.

The credit squeeze will have an impact and we have had one or two jobs stopped, but that is normal at any time.

There are winners and losers in any kind of recession. Winners have the ability to invest in the future and we are doing that through new equipment to stay at the leading edge.

It's still a struggle to find good people, but I was with Amec for 33 years so I've recruited a few key people from there.

We tend to go after people we know rather than use the open market.

But we are struggling to find people on the commercial side and QSs are always in demand.