Ministers ‘planning new nuclear subsidies’

Ministers are considering new subsidies for the nuclear industry following Hitachi’s withdrawal from the market this week, it has been reported.

Horizon Nuclear Power announced yesterday that it will cease all remaining activity on its two nuclear developments – Wylfa Newydd nuclear facility at Anglesey, and its Oldbury nuclear project site in south Gloucestershire.

The Times reports that Boris Johnson and senior adviser Dominic Cummings are keen to restate the government’s commitments to nuclear builds and chancellor Rishi Sunak and business secretary Alok Sharma will be invited to a summit to discuss future levels of government support.

Hitachi-subsidiary Horizon announced the shutdown of the Wylfa project in January last year after failing to agree financing terms with Whitehall. The company called the Regulated Asset Base (RAB) funding model, where private investors buy stakes in long-term infrastructure projects, with users paying for the infrastructure through energy bills, to be introduced for the scheme.

Horizon director of nuclear operations Gwen Parry-Jones told MPs last year that getting early returns, as they would under the RAB model, was key to the company being able to commit to the project. The then construction minister Richard Harrington told MPs in February 2019 that government work on the RAB model would be completed by that summer.

A Department for Business, Energy and Industrial Strategy (BEIS) consultation on using the RAB model for nuclear projects ran from July to October 2019. The government has yet to publish its outcome or a response.

Contractors wanted for £60m metro track works

Tyne and Wear’s transport body is looking for contractors to complete £60m of infrastructure improvements to deliver a dual-tracked metro network.

The scheme, known as the Metro Flow Programme, will involve unifying two existing Network Rail and Metro infrastructures to create a single twin-track between Pelaw and Bede. The winning contractors will complete the design and manage the installation and commissioning for metro operator Nexus.

Works will also involve construction for buildings relating to railway transport, demolition, site preparation and clearance work. The contractors selected will review track drainage and replace or update it as necessary, strengthen underbridges, lower platforms at Jarrow and Hebburn stations, raise all existing overhead lines, and re-signal the track from Pelaw junction through to Bede to support the joint running of light and heavy rail. A third track, which currently loops around Hebburn and Jarrow station, will also be decommissioned and removed.

The scheme will be funded by the £1.7bn Transforming Cities Fund, launched by the Department for Transport in 2017. The contract is set to run from 13 September next year, until February 2023.

ONS: civils up beyond pre-crisis levels as industrial projects stall

Infrastructure has become the first part of the sector to bounce back above pre-crisis levels of output, according to figures released by the Office for National Statistics (ONS).

The value of infrastructure work in July was £1.97bn, the ONS said. This was 0.4 per cent above the £1.96bn recorded in February and 7.8 per cent higher than the value of infrastructure work in July 2019. Under a seasonal adjustment measure, which allows for different levels of work usually experienced at different times of year, July’s infrastructure value was up by 6.1 per cent compared to February.

The weakest level of recovery was seen in private industrial construction. A previously encouraging trajectory towards recovery stalled in June, as industrial work saw only a marginal increase on the value of June’s output. For the second month in a row it remained around 30 per cent below February, under the statistics body’s seasonally adjusted values. February is used as a benchmark as it is the last month to be entirely unaffected by the crisis.

ONS statistics show that all parts of construction have recovered substantially following the unprecedented £5.1bn drop in activity seen in April. Record growth of 23.5 per cent across the sector as a whole was seen in June, with a further 17.6 per cent added in July.

Sadiq Khan intervenes to approve 500-home development

The mayor of London Sadiq Khan has intervened in a planning decision in Hillingdon, west London, to approve a 500-home site.

Hillingdon Council rejected plans from housebuilder Inland Homes back in February with the mayor ‘calling in’ the project in the following month. At a hearing yesterday afternoon, Khan approved the development, although the application is subject to a final decision from housing secretary Robert Jenrick.

Located on the site of the Master Brewer hotel and pub, the proposed redevelopment includes 1,250 square metres of commercial space, transport improvements and new public realm. According to Inland Homes, the masterplan includes “a network of pedestrianised areas, landscaped public squares and extensive green spaces to create a diverse garden quarter”.

Last month, Inland Homes agreed a deal to buy a 14.85 ha site in west London from the Defence Infrastructure Organisation. It wants to build more than 1,000 homes on the historic Cavalry Barracks site in Hounslow and intends to submit a planning application in the next six months. The deal was its fifth with the Ministry of Defence and Inland Homes’s largest to date.

Lack of new work sees August’s activity slow

A lack of new work slowed construction activity in August, the latest data from the Purchasing Managers’ Index has shown.

The PMI data for August was 54.6, which was down from 58.1 in July. Any figure above 50.0 indicates growth of total construction output. July’s increase was the highest in five years and the three months prior to August were all bigger than last month’s figure. Activity in housebuilding, commercial work and civil engineering was weaker in each category compared to the previous month.

The IHS Markit/CIPS survey found that supply chain disruption continued across the industry. Respondents also reported that “stock shortages and an imbalance of supply and demand for construction inputs contributed to higher purchasing costs. The overall rate of input price inflation was the highest since April 2019.”

There was also an improvement in business expectations among construction companies for the year ahead. Twice as many respondents (43 per cent) anticipate an increase in construction output over the next 12 months as those expecting a fall (19 per cent).

Job losses eased slightly in August, but are still occurring at the fastest rate in a decade.

Draft recovery plan for Scottish industry released

Scottish construction needs urgent steps to establish a clear pipeline of work and more working practices that raise productivity as well as keeping workers safe, according to a new plan.

The Scottish Construction Leadership Forum (CLF), a group established by sector leadership group Construction Scotland and the Scottish Government, has released a draft plan for the industry’s recovery, on which it is asking for feedback.

During the coronavirus emergency, the majority of Scotland’s construction sites were shut down completely prior to a phased reopening that began in mid-May.

According to the CLF, activity in Scotland’s construction sector during June was still 28.6 per cent lower than a year before.

The draft plan calls for urgent steps to establish:

  • A clear pipeline of work on fair commercial terms
  • Support for continued employment as well as people left unemployed by the crisis
  • Working practices that protect worker safety but raise productivity

The draft is due to be revised after an initial feedback phase closes on 15 September.

Gatwick puts off pier expansion until 2022

Gatwick has confirmed that the largest plank of its airport construction programme has been suspended until at least 2022.

The planned doubling in size of Pier 6, one of the buildings where aircraft dock, has been put on hold as a result of declining income due to the coronavirus crisis. Bechtel was appointed delivery partner on the £180m project, designed to accommodate an increase in passenger numbers, in 2017.

In a statement, Gatwick said that enabling works – including realigning taxiways and stands – had been completed this year and construction works had started, but the main job has now been postponed.

Gatwick, which is majority-owned by Vinci, reported a £343.9m pre-tax loss for the first six months of 2020. It made a £59.4m profit in the same period last year.

Crossrail overspend to reach £1.1bn as new opening date announced

Crossrail will cost an extra £450m to complete and will not be ready to open until 2022.
The project board announced this morning that the rail line, originally due to open in 2018, needs £1.1bn more than was announced in December 2018 to bring work to completion. In November last year it was announced it would need between £400m and £650m more to complete than was stated in 2018, but today this figure has risen further still.
The latest estimate means the scheme will cost more than £18bn in total to complete, having been budgeted at £15bn prior to 2018.
How the extra money will be raised has not yet been determined, with talks having taken place between Transport for London (TfL) and the Department for Transport since November. No conclusion has been reached but extra TfL borrowing was suggested earlier this year.
A period of intensive construction activity is being carried out this month and next, in a bid to complete remaining construction works so that trial running of trains can commence.
As well as the increase in funding needed to complete the project, delays were projected to cost TfL at least £500m in lost revenue from passenger use too. The transport operator has since had to be bailed out by Whitehall this year amid declining revenues during the pandemic. A number of other proposed construction projects, including the tramlink extension from Colliers Wood to Sutton and an expansion of South Kensington underground station, have been put on hold as a result.

More than 1,000 homes planned for historic barracks

The Defence Infrastructure Organisation (DIO) has agreed to sell a 14.85-hectare site in west London to Inland Homes. The brownfield developer aims to build over 1,000 homes on the historic Cavalry Barracks site in Hounslow, with a gross developed value of £600m.

The barracks, 2km west of Hounslow town centre and 4.5km from Heathrow, includes open playing fields and a parade ground, with the tallest building currently five storeys.

Military use of the location dates back to 1793 and the barracks currently boasts 14 Grade II-listed buildings as well as 19 locally-listed buildings. In July last year Hounslow Council adopted a supplementary planning document laying out restrictions on the redevelopment of the site. It includes an advisory “concept plan” for 1,000 homes in buildings of two to five storeys in a layout that retains the site’s central open spaces.

The developer expects to take over the site from military use in August 2021, and intends to submit a planning application for its mixed-use scheme including 1,000 homes, within the next six months.

Supply shortages crept up at the end of July

More contractors reported problems with material supplies in the last two weeks of July, data from the Office for National Statistics has revealed.

The proportion of firms reporting problems crept up to 37 per cent in the fortnight ending 26 July, up from 34 per cent the previous fortnight. This was broadly equal to the proportion reporting problems at the end of June, but down from 46 per cent that suffered supply issues at the end of May.

The construction industry now has a greater proportion of firms struggling to get materials than any other sector in the UK. The next worst-affected area of the economy is the healthcare sector, where 33 per cent of firms reported supply problems in the fortnight ending 26 July.

Increased supply shortages do not appear to have translated into higher prices, according to the ONS data. The proportion of firms reporting price increases actually dropped to 20 per cent in the last two weeks of the month, from 21 per cent in the previous two weeks.