Credit crunch bites for demolition contractors

Being the first specialist in on a project, demolition contractors have been among the first to feel the effects of the downturn. James Stagg explains.

Like the rest of the industry, demolition contractors are having to work harder to find jobs. Firms that have found contracts simple to come by for the last few years are now looking to expand their horizons and branch out into sectors they hadn't considered for some time. With the commercial market stagnant, it's now all about infrastructure, hospital and schools.

"Everyone is tightening their belts," says Howard Button, national secretary at the National Federation of Demolition Contractors (NFDC). "Obviously it's better for firms to keep going with fewer operatives than to shut down completely. If you don't do these things, you will struggle. In the recession of the 90s, the company I was running [Button Demolition] had to take that approach and it is still surviving now."

Those who are traditionally strong in the commercial sector are finding it particularly tough. Keith Roshier, managing director at H Smith Demolition, says that within a month of the collapse of Northern Rock, clients were holding back. "But we're at the front of the food chain, so hopefully we'll come out first," he adds. "We're now looking at other markets. Rail is high on the list and we're also concentrating on schools, hospitals and hotels."

But it will be a crowded market as everyone seems to be chasing the public money. "About 18 months ago, we made the strategic decision to look at infrastructure," explains Paul Bland, pre-construction director at the McGee Group. "We're currently on site at a shared service yard as part of the King's Cross Station enhancement and are looking at the Victoria Station upgrade.

"Building Schools for the Future is another area we're getting work in, as government spending helps to fill in the gaps."

Commercial buildings

An area that demolition contractors might have gained some mileage in is the demolition of commercial buildings. Rather than have a building sitting vacant and attracting the tax on empty commercial property, developers now consider demolishing them and rebuilding at a later date. The British Property Federation has been campaigning to scrap the levy it describes as the "bombsite Britain" tax for some time, and over 120 MPs have signed Commons motions calling for the tax to be axed. Though this would have an obvious impact on the scope of works available to demolition contractors.

Tom Stokes, managing director for business centre developer Evans Easyspace, says the firm always has vacant properties on its books, but this means there is scope for companies to move if they want to change or downsize. He adds: "We are being penalised for providing a flexible option, which is good for the economy and good for small businesses."

A typical job might have been to do a soft strip on one of these unused commercial facilities, but now contractors are being asked to knock down the building, leaving the concrete slab to be built on when the market improves.

"I'm pricing up a job now where the client wants us to demolish down to the slab and keep it good for up to five years," says Roshier. "I'm not sure what the client's intention is, but it certainly looks as though it is to avoid the tax."

But the work may not be as lucrative as demolition contractors might like. This type of demolition has traditionally been performed at cost, with profit being raised from the sale of scrap. But the market for steel scrap has hit rock bottom, dropping from £300/t to £50/t, making some projects unviable.

Button says contractors on long-term jobs that were priced some time ago may even be forced under. "Rather than paying £100,000 to £200,000 empty property rates, it pays for some developers to knock it down for the same price and build another when the market returns.

"But the problem now is that nobody wants scrap, so it doesn't pay for demolition contractors. The big scrap companies have thousands of tonnes sitting on docks waiting to go, but nobody wants it."

Landfill tax

Meanwhile, the demolition industry has to contend with a tax of its own. The landfill tax took its biggest hike since its inception in April, going up £8/t to £32/t, but Howard Button says for most members the tax isn't too much of a burden.

He adds: "Landfill tax is a slight problem, but most of our members are so good at recycling that it doesn't affect them as much as some other industries. In fact some 90% of demolition materials are recycled."

The only bugbear the NFDC still has with the landfill tax is the consistent inclusion of asbestos. "All we are allowed to do with asbestos is send it to landfill, but we are still charged to do it," he explains.

"It has to go to landfill so why do we have to pay the tax on something that can't be recycled?"

And it's the sectors experience in recycling that has enabled it to provide added value for its clients. Demolition contractors have been recycling for decades, which means they're perfectly placed to aid with Site Waste Management Plans (SWMPs).

John Keehan, finance director at Keltbray - a firm bucking the trend having just achieved the highest monthly turnover in the company's history - says it provides SWMPs on all of its projects. "In terms of recycling, we can report where all our waste ends up.

"We have bought into a waste recycling facility in the UK and also have a joint venture with a Belgian company for dealing with contaminated waste. It's now taken on barges to Gent and turned into paving chips."

Most demolition contractors offer waste management services and have partnerships with waste management firms. Even though they provide SWMPs as a matter of course, Button says it is not actively being pushed by clients on smaller projects. "We've produced a template for members to follow that is designed to help contractors achieve best practice with site waste management plans. But many have found they're still not being asked for. This is being turned to demolition contractors' advantage as they're able to educate the client and make a SWMP part of the service."

NFDC revises guidance on demolition of high-rise structures

With techniques such as high balling and explosive demolition now restricted to specific applications, the NFDC has revised its guidance on the deconstruction of high-rise structures.

Unlike its 17-year-old predecessor, the new guidance focuses primarily on floor-by-floor or top-down methods of deconstruction.

John Woodward, co-author of the new edition, explains: "The scope of the guidance we finally set at structures of 18m and above, was the source of a great deal of discussion because, once again, the goalposts have moved somewhat since the previous edition was published."

The guidance recognises current legislation and provides advice on roles and responsibilities, safety legislation, and environmental and regulatory obligations.

The NFDC has also produced demolition-specific guidance on the sale use of mobile crushers. Guidance notes are available from the HSE, but the NFDC was concerned.

The resulting document identifies and addresses key risk areas including machine guarding, vibration exposure, clearing blockages, slips and trips, and the interaction with the loading machine.