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Construction output grew 2.1% in 3rd quarter

November 21, 2018/in Home Page news feed, News

Construction output is continuing to recover following a relatively weak start to the year, increasing by 1.7% in September 2018 and by 2.1% for the third quarter.

The 2.1% growth in GB construction output in Quarter 3 (July to September) 2018 followed a fall of 1.6% in the first quarter and an increase of 0.8% in Quarter 2 (April to June) 2018.

Growth in the third quarter of 2018 was driven by all new work which increased by 2.8%, and repair & maintenance which increased by 1.0%, according to Office National Statistics data for Great Britain.

Between August and September 2018, construction output increased by 1.7%, driven by a 2.8% increase in all new work and partly offset by a fall of 0.3% in repair & maintenance.

The level of the all work series for September 2018 reached £13,995 million – a record high since the monthly records began in January 2010.

Construction output increased by £872m in Q3 2018 compared with Q2 2018. The most notable contribution to growth came from private housing new work, which increased by £507m between Q2 and Q3.

Non-housing repair & maintenance and infrastructure also grew strongly, by £230m and £191m respectively.

In contrast, downward pressure on construction output in Q 3 2018 came from private commercial new work, private housing repair & maintenance and private industrial new work, which had falls in the three-month on three-month series. These decreased on Q2 by £162m, £124m and £60m respectively.

Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, commented: “The construction industry is enjoying an Indian Summer. True, the surge in output in the third quarter is flattered by comparison with the grim decline of the first quarter and the plodding indifference of the second. But this is real, and welcome, progress.

“House-building retains its crown as both poster child and ‘get out of jail’ card for the industry as a whole. House-builders delivered a half billion boost to the industry in the third quarter, but elsewhere the growth was patchy at best. Infrastructure work remains in positive territory but output is down, with contractors focusing on finishing existing projects rather than starting new ones.

“Among developers there is a widening confidence gap between the overheated southeast and other areas where demand is stronger and margins better. Despite a marked improvement in the Brexit mood music this week, months of deadlocked negotiations have choked investor appetite. Unless and until the political limbo is ended, the industry will continue its holding pattern of two steps forward and one step back.”

Source: UK Construction Week

Construction growth rising

November 7, 2018/in Home Page news feed, News

UK construction growth has risen through October, thanks in part to an upturn in civil engineering activity.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index rose in October to 53.2. This was up on the 52.1 reported in September and against the no-change reading of 50. For the uninitiated, a figure below 50 indicates contraction.

Having dropped off somewhat through August and September, civil engineering activity grew at its quickest pace since July 2017. Housing and commercial construction also expanded, albeit at a slower rate. New business volumes rose more slowly however, with construction firms citing intense competition and delayed decisions from clients as the root causes. Worryingly, business optimism fell to a near six-year low.

Understandably, input purchasing increased more cautiously – at its slowest rate in seven months. And yet, delivery times for construction products and materials continued to stretch, with firms reporting stock shortages at builders’ merchants.

Trevor Balchin, Economics Director at IHS Markit, said: “Although total UK construction activity rose at a stronger pace in October, the underlying survey data paint a less rosy picture for the sector towards the end of the year.”

According to Balchin: “Construction firms continued to raise headcounts at a strong pace, suggesting they are not expecting an imminent contraction in demand. That said, if the new orders and expectations indices remain at current levels or fall further, the employment index could also drift back towards the 50.0 no-change mark.”

Duncan Brock, Group Director at CIPS, added: “These results point to the sector getting stuck in the mud as we approach March 2019, and with ongoing supplier delays and stock shortages, the sector may not be able to respond quickly enough anyway should there by a sudden upturn in fortunes.”

Source: UK Construction Week / UK Construction Media

Commercial building was the best performing area of construction output in August

September 5, 2018/in Home Page news feed, News

Commercial building was the best performing area of construction output in August 2018, followed closely by residential work.

However, the latest expansion of housing activity was the weakest since March, and civil engineering workload decreased for the first time in five months. A number of survey respondents cited a lack of new work on infrastructure projects.

Overall, August data pointed to a renewed slowdown in output growth across the UK construction sector but positive signs included an increase in new business and employment growth maintaining the recent peak level seen in July.

At 52.9 in August, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) eased from July’s 14-month high of 55.8, but remained above the crucial 50.0 no-change mark. The latest reading signalled a moderate overall rise in construction output, with the rate of expansion the weakest since May.

Anecdotal evidence cited resilient client demand and supportive economic conditions, but there were also reports that Brexit-related uncertainty continued to hold back investment spending. Higher overall workloads encouraged additional staff recruitment across the construction sector in August. Survey respondents noted tight labour market conditions and shortages of suitably skilled candidates to fill vacancies.

Purchasing activity increased for the eleventh consecutive month in August, although the latest upturn was the weakest since March. Low stock and labour shortages among suppliers continued to impact on delivery times for construction products and materials. The latest deterioration in supplier performance was the greatest seen for almost three-and-a-half years. Despite stretched supply chains and rising energy-related costs, latest data indicated that input price inflation edged down to its lowest since July 2016.

UK construction companies are optimistic that business activity will expand over the coming 12 months, but the degree of confidence eased to its weakest since May. Survey respondents cited confidence about achieving organic growth through new project wins and geographical diversification, while Brexit uncertainty remained the main factor cited as holding back sentiment.

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “The construction sector slipped back into a slower growth phase in August, with this summer’s catch-up effect starting to unwind after projects were delayed by adverse weather at the start of 2018.

“Civil engineering was the worst performing area of the construction sector, with output in this category falling for the first time since March amid reports citing a lack of new work on infrastructure projects. House building saw a particularly sharp slowdown since July, meaning that commercial construction was the fastest growing sub-sector in August.

“There are some encouraging takeaways from the latest survey, especially the resilient degree of new business growth in August and a strong upturn in staff recruitment. Survey respondents noted that they are confident about achieving organic growth at their businesses in the coming 12 months. The degree of optimism reported in August remained constrained by external factors, including domestic political uncertainty, stretched supply chains and shortages of suitably skilled labour.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Cracks in the construction sector’s masonry were beginning to show again this month, and the house building sub-sector was hit the hardest as it reported the poorest performance since March this year.

“Civil engineering saw a drop off in larger infrastructure projects and found itself in contraction territory. Levels of new work held moderately steady overall, but with any significant growth held back by Brexit uncertainty. It was also the logjams in supply routes that hampered work in hand where material and skills shortages meant vendor performance deteriorated to its worst level since March 2015.

“If there is anything positive to note from this month, it would be that the rate of hiring remained strong. However, persistent pressures from skills shortages and slow rates of new orders will continue to hit business optimism still trailing below the survey’s average.

“The sector is hovering too close for comfort to the no change mark, which makes it a contender for more disappointment next month. Though the path to Brexit is paved with good intentions, without significant progress the sector will soon be building castles in the air rather than on solid ground.”

Source: The Construction Index

Summer high for construction

August 29, 2018/in Home Page news feed, News

UK Construction is riding high through summer, with the latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) indicating the fastest rise in construction output since May 2017.

With robust and accelerating rises in construction activity during July, the industry is riding a successful summer. House building has expanded at its sharpest pace since December 2015, underpinning the sector.

The latest survey also indicated that new business growth gained momentum, which contributed to the largest rise in employment numbers since December 2015.

The latest survey results put the Index at 55.8, a sharp rise on 53.1 in June. Purchase Mangers responding to the survey noted improved demand and a higher volumes of new starts, together with some degree of catch-up work from the terrible spring weather.

Continuing the trend seen this year, house building and residential work remains the best performing sector. Activity in July shows the strongest upturn since December 2015. Commercial work, which has been lagging since 2015 also showed a strong pick-up in pace.

July 2018 has given the construction sector its strongest increase in total new orders for over a year, with survey respondents noting a general improvement in client demand had led to successful contract negotiations on larger scale projects.

However, construction companies are cautious about the year ahead business outlook, with the degree of positive sentiment about future workloads unchanged since June and remaining weaker than the long-term survey average. Anecdotal evidence suggests that Brexit-related uncertainty continued to hold back business optimism in July.

Supply chain pressures continued in July, which contributed to another sharp lengthening of delivery times for construction products and materials. However, input cost inflation moderated from the nine-month high seen in June.

Civil engineering activity increased only moderately, with companies noting a lack of work to replace completed projects (particularly railway infrastructure work).

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI®, commented: “July data reveal an impressive turnaround in the performance of the UK construction sector, with output growth the strongest for just over one year. While the recent rebound in construction work has been flattered by its recovery from a low base earlier in 2018, there are also signs that underlying demand conditions have picked up this summer. New business volumes expanded at the strongest rate since May 2017, while workforce numbers increased to the greatest extent for just over two and-a-half years.

“House building was the bright spot for construction growth in July, alongside a stronger upturn in commercial development projects. Residential activity and commercial work both increased at the sharpest pace since December 2015, which contrasted with another subdued month for civil engineering.

“UK construction companies experienced substantial cost pressures in July, driven by rising fuel bills and higher prices for steel-intensive items. Meanwhile, supply chains struggled to keep up with greater demand for construction products and materials, which resulted in the greatest lengthening of delivery times since July 2017.”

Source: UK Construction Media

Construction growth to rebound to 2.3% next year

August 8, 2018/in Home Page news feed, News

UK construction output is expected to bounce back to 2.3% growth in 2019 after dipping by 0.6% this year.

The growth hiatus this year ends the five-year run enjoyed by the industry, fed mainly by private sector home building and strong commercial and industrial activity.

While forecast 2019 and 2020 growth will boost civils contractors and trade contractors working for house builders, commercial building contractors are expected to continue to feel the squeeze in both commercial and retail work opportunities.

The latest forecast from economists at the Construction Products Association, revises 2018 output down from stagnation to contraction, due mainly to bad weather and the fall-out from Carillion.

Forecasters predict growth will bounce back in 2019 and then expand by 1.9% in 2020.

Strong house building activity outside London will drive up activity in this sector by 5% in 2018 and 2% in 2019.

Infrastructure will also become a primary driver of growth for the whole industry, with output forecast to hit a historic high of £23.6bn by 2020, driven by large projects such as HS2 and Hinkley Point C.

Without the forecast growth in infrastructure and private housing activity, total construction output would fall by 3% in 2018 and remain flat in 2019.

The demise of Carillion resulted in a poor performance for the industry at the start of the year, which combined with the bad weather, lost UK construction £1bn of work.

It is estimated 60% of this work may be recovered, but Carillion’s collapse will cause further delays at two major hospitals as work on the £335m Royal Liverpool University and Birmingham’s £350m Midland Metropolitan hospitals is on hold until at least 2019.

Brexit uncertainty continues to drive the sharpest decline for construction in the commercial sector, particularly felt in the offices sub-sector which is expected to fall 20% in 2018 and a further 10% in 2019.

Meanwhile, the shift to online shopping is causing woes for the high street, with new retail construction expected to fall by 10% this year.

Noble Francis, Economics Director at the Construction Products Association said: “Overall, it’s mixed fortunes for contractors at the moment.

“On the positive side, house builders are keen on accelerating building rates outside of London and that is expected to be enough to offset sharp falls in house building in the capital.

“Firms working on major infrastructure projects also have a lot of work in the pipeline. Infrastructure output is forecast to rise by 3% in 2018 and 13% in 2019.

“This growth is highly dependent on large projects such as HS2 and Hinkley Point C. As ever, there remain concerns about government’s ability to deliver infrastructure projects without the cost overruns and delays that we have seen on Crossrail and HS2 recently.

“On the negative side, the elephant in the room is clearly Brexit uncertainty, which has had a big effect on international investment, especially where it is high up-front investment for a long-term rate of return, which is now highly uncertain.

“It badly affects demand in sectors such as prime residential in London, commercial offices towers and industrial factories, which is dependent on manufacturing.”

CPA summer 2018 forecast

Construction output to fall by 0.6% in 2018 before growth of 2.3% in 2019 and 1.9% in 2020
Private housing starts to rise by 2.0% in 2018 and 2019
Commercial offices output to fall by 20.0% in 2018 and by 10.0% in 2019
Commercial retail output to fall by 10.0% in 2018 and remain flat in 2019
Infrastructure construction to grow by only 3.2% in 2018 and 13.0% in 2019

Source: Construction Enquirer

Construction buyers have reported strong rise in construction activity

July 11, 2018/in Home Page news feed, News

Construction buyers have reported the strongest rise in construction activity since November 2017.

The latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index for June registered 53.1 in June – up from 52.5 in April.

The rise represents the sharpest increase in overall construction output since last November.

New orders also rose at their fastest pace since May 2017.

Residential and commercial work were the main drives as civil engineering continued to plod along.

Tim Moore, Associate Directorat IHSMarkit and author of the IHSMarkit/CIPS Construction PMI said: “The latest increase in UK construction output marks three months of sustained recovery from the snow-related disruption seen back in March.

“A solid contribution from house building helped to drive up overall construction activity in June, while a lack of new work to replace completed civil engineering projects continued to hold back growth.

“Of the three main categories of construction work, commercial building was sandwiched in the middle of the performance table during June.

“Survey respondents suggested that improved opportunities for industrial and distribution work were the main bright spots, which helpedto offset some of the slowdown in retail and office development.

“Stretched supply chains and stronger input buying resulted in longer delivery times for construction materials during June.

“At the same time, higher transportation costs and rising prices for steel-related inputs led to the fastest increase in cost burdens across the construction sector since September 2017.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “With the fastest rise in new orders since May 2017, it appears the brakes are off for the construction sector.

“Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects and hesitancy was swept away.”

Source: Construction Enquirer

£22 million cash injection to address skills shortage

June 27, 2018/in Home Page news feed, News

The government has attempted to address the construction industry skills shortage with a £22m cash injection which will bring training to construction sites and therefore allowing learners to apply their knowledge in a real-world environment.

The multi-million-pound Construction Skills Fund has been announced by skills minister Anne Milton with 158,000 new construction jobs expected to be created in the UK over the next five years after first being unveiled by the chancellor Philip Hammond in his Spring Statement.

Money will go towards 20 on-site hubs to train more people to help deliver 300,000 new homes a year by the mid-2020s. The 18-month scheme is funded by the Department for Education (DfE) and will be administered by the Construct.on Industry Training Board.

Commenting on the announcement, Milton said: “For our economy to thrive we need everyone, regardless of their age or background, to be able to get the training and the skills they need to make the most of the opportunities that lie ahead. The government has committed to building 300,000 new homes a year by the mid-2020s and we want to make sure that we are investing in the UK skills base to deliver this. A career in construction offers the chance for many people to establish and grow their own business. On-site training will be hugely beneficial for employers and trainees, as it will help bridge the gap between training and working in the industry, meaning trainees are site-ready sooner.”

The fund forms a vital part of the Government’s modern Industrial Strategy – a long-term plan to build a Britain fit for the future by helping businesses create jobs in every part of the UK.

It underlines the Government’s commitment to improving education standards for everyone, so they can gain the skills they need to succeed and can secure good jobs.

The fund aims to support:

20 on-site training hubs
Work experience and placements for people working to join the industry
Entry pathways for those currently unemployed
Pathways for career switchers.

CITB is now calling on employers, housing associations and other interested bodies such as LEPs and local authorities to submit expressions of interest. These can be from both existing and prospective on-site learning hubs.

The funding will only support on-site training provision, and access to live construction projects is essential to qualify.

Steve Radley, Policy Director at CITB, said: The Construction Skills Fund is a milestone scheme for the sector and provides a significant investment in skills and training. It will help attract new talent and bridge the gap between training and working in the industry. Having training on or near to major projects will reveal what an exciting sector this can be, while also putting new talent in the shop window. We want all interested organisations to submit Expressions of Interest that are innovative, collaborative and with training at their heart. We will support applicants through the process and provide expert guidance to apply to the fund. We are pleased to help deliver this major new project and we are confident that, with industry support, it can help meet construction’s skills needs now and in the future.

Managing director Graham Ratcliffe said: “It is great seeing funds being made available to support on-site training through hubs similar to the Construction Skills Villages in Scarborough and Barnsley. We hope to secure funds to expand our unique and successful model in turn helping support the construction industry overcome a skills gap.”

Funds provided by the DfE will also be provided for work experience placements for people working to join the industry, entry pathways for those currently unemployed and pathways for career switchers.

The CITB is now calling on employers, housing associations and other interested bodies such as LEPs and local authorities to submit expressions of interest. These can be from both existing and prospective on-site learning hubs.

Radley continued: “Having training on or near to major projects will reveal what an exciting sector this can be, while also putting new talent in the shop window. We want all interested organisations to submit Expressions of Interest that are innovative, collaborative and with training at their heart. We will support applicants through the process and provide expert guidance to apply to the fund.”

The Construction Industry Training Board (CITB) has released new research investigating how to tackle the skills crisis.

With Brexit on the horizon, the research points to the need for greater skills transferability, with a key goal to attracting talent from other sectors and trades.

The new report, ‘Construction and Built Environment: Skills Transferability in the UK’, surveying 500 employers across the UK, found that with a smaller construction talent pool post-Brexit, the sector needs to look at encouraging people from different industries to look at construction as a good career progression.

The industry is not noted for its diversity of talent, with researchers finding that 62% of employers took no action to encourage employees to transfer between trades. This is despite approximately one in five (19%) of construction sector workers having previously worked in another sector.

The report highlighted manual occupations, such as steel erectors and bricklayers, as the roles with the best potential to transfer skills.

The survey pointed to a number of challenges in increasing skills transferability, including:

Improving the image of the industry
Changing the way training is delivered to it promotes multi-skilling
Concerns from employees and unions around multi-skilling

Radley continued: “Our research shows that transferability of skills is a growing issue, particularly with Brexit looming.

“While many employers are not yet looking at it, it could become a significant way to meet our skills needs in the coming years.

“CITB clearly has a role to play in this. Our forecasts can help prioritise support for upskilling and ensure training providers are well placed to respond. In addition, we will collaborate with industry to develop top-up courses to enable transition for people with relevant transferable skills.”

Source: Infrastructure Intelligence / UK Construction Media

Construction output increased 8% in 2017

June 13, 2018/in Home Page news feed, News

Recently revised data from AMA Research indicates that total construction output increased by 8% in 2017 compared with 2016, to reach a total value of £163.5bn. In terms of value, new work accounts for the largest share, with output growth having been particularly strong in the residential new work segment, which saw growth of 14% in the year. RMI output has also been stronger in the residential than in the non-residential sector. Overall RMI output increased by 7% in 2017.

In H1 2018, the construction sector remains uncertain to moderately optimistic. Indications are that new orders remained positive into Q4 2017 and this should lead to some growth in terms of output into 2018 and beyond for certain key sub-sectors, and as a result, the outlook for the UK construction market remains mildly positive into the medium-term, although with lower rates of overall growth than previously forecast.

The outlook for the housing sector remains positive, if modest, with 17% overall growth in residential output currently forecast between 2017 and 2022. The imbalance between demand and supply for new housing will remain one of the key drivers for continued output growth for the residential sector, and the number of new programmes designed to address shortage in housing stocks should motivate output into the medium-term.

However, predicted growth in the newbuild sector is set against lower growth levels for completions, and also takes into account an element of materials inflation – in particular for the finishing of new housing, such as sanitaryware, tiles and electrical wiring products. RMI in the residential sector is currently forecast to remain relatively steady, with low annual growth rates reflecting consumer confidence levels.

The non-residential sector is facing more subdued growth into the medium-term with output currently forecast to reduce to 1-2% 2018-19, followed by annual growth of around 3% to 2022. The issue of business confidence and investment levels and the “wait and see” approach regarding the commitment to future funding and capital commitments are all likely to act as a brake on output levels into the medium-term.

Infrastructure will remain the largest sub-sector with growth underpinned by HS2 which has the potential to deliver £3-4bn pa of output to 2022. However, the HS2 works also bring into question the issue of capacities both in terms of materials but also workforce which could result in skills shortages for other sub-sectors into the medium-term.

The entertainment & leisure sector output is forecast to see good overall growth to 2022, when output is forecast to be around £10.9bn. Following growth of around 33% in 2017, annual growth rates are currently forecast to fall back to around 3-5% from 2018 to 2022.

The retail sector is currently forecast to perform less well, due to a combination of structural changes within the sector and also potential reduction in consumer confidence and spending levels, and the public sector is likely to see less investment in capital projects into the medium-term, particularly given the focus on the collapse of Carillion and their extensive involvement in PFI contracts.Pa

“Overall growth in construction output is forecast to reduce to around 2% for 2017-18, but improving to 3% for 2019-22” said Jane Tarver of AMA Research. “This more modest forecast takes into account the continuing uncertainty surrounding the Brexit process affecting the timing of business investment decisions.”

AMA Research publish the Construction and Housing Forecast Bulletin – GB 4 times a year – the bulletin provides analysis of the overall construction market in current prices, in terms of new work and RMI activity, also public and private sectors and detailed reviews of the two main sectors with sub-sector analysis for quarterly output and new orders, housing starts and completions, as well as forecasts to 2022.

The recent issue of the bulletin includes revised data for 2016 as well as preliminary data for the full year 2017 for output and new orders for total GB construction, as well as the residential and non-residential sectors, though this may be subject to revision in the medium term.

Source: UK Construction Week / AMA Research

Demand for construction robots will more than double by 2023

May 23, 2018/in News

The use of robots in the construction industry is forecast to grow considerably over the next five years, according to new research.

Valued at $76.6mn in 2018, the construction robot market will more than double in size to $166mn by 2023, growing at around 17% a year.

The report, by MarketsandMarkets, says that the growth will be mainly driven by factors such as demand for enhanced productivity, quality, and safety due to growing urbanisation worldwide.

The semi-autonomous segment is the largest currently, accounting for 67% of the overall construction robot industry. Common tasks for these revolve around infrastructure monitoring and predictive and corrective maintenance.

Labour shortages are predicted to lead to the rise of exoskeletal robots over the next five years, with this particular market segment expected to grow the most between now and 2023.

Regionally, the report highlights Europe as a major territory for construction robots.

This is attributed to the large facilities of various companies for the development and production of construction and demolition robots, increasing number of government regulations, and growing need for the residential and non-residential construction projects.

In terms of companies, a healthy mix of large and small players are competing for business, including Husqvarna (Sweden), Ekso Bionics (US), Komatsu (Japan), Fujita (Japan), Construction Robotics (US) and Fastbrick Robotics (Australia).

Contractors who don’t pay on time to be banned from public works

April 3, 2018/in Home Page news feed

Main contractors who do not pay their supplier promptly are to be banned from bidding for public sector contracts according to the Government.

The measure is among a package of proposed measures to help smaller businesses win public sector and government contracts.

Under the proposals, tier one contractors on government contracts, including construction projects, will be forced to demonstrate “fair and effective payment practices with their subcontractors”, otherwise they will not be allowed to bid for work.

Other plans include allowing subcontractors to have greater access to buying authorities to report poor payment performance.

Further requirements mean suppliers will have to advertise subcontracting opportunities via the government’s Contracts Finder procurement website. They will also have to provide the government with data showing how businesses in their supply chain, including small businesses, are benefiting from supplying to central government.

In addition, each government department has been directed to nominate a minister as small business champion.

No timetable has been given for implementation of the proposals.

Cabinet Office minister Oliver Dowden said: “This government is listening to the business community and is committed to levelling the playing field for smaller suppliers to win work in the public sector.

“We have set a challenging aspiration that 33% of procurement spend should be with small businesses by 2022 – and are doing more than ever to break down barriers for smaller firms. Small businesses are the backbone of the UK economy, and play a key role in helping us to build a strong, viable private sector that delivers value for taxpayers and jobs for millions all over the UK.”

Federation of Small Businesses national chairman Mike Cherry said: “Each year, the UK public sector spends over £200bn on goods and services from third parties. As such a large and prominent customer in the economy, the government has a pivotal role to play in demonstrating what it is to be a good client.

“It is right then that the government today announces, as part of a new package to boost SME procurement, that it will clamp down on poor payment practice throughout public procurement supply chains. Companies who pay late should not be rewarded with public sector contracts.

We need a robust public procurement process that holds larger companies to account for their payment practices.”

The Specialist Engineering Contractors’ (SEC) Group also welcomed the proposals. SEC Group chief executive Rudi Klein said that he was particularly pleased by the government’s promise to exclude poor payers from government procurement.

“We have been urging the government to introduce a yellow/red card system for a long time. The yellow card is a warning to improve payment performance and the red card excludes a continuing poor performer from bidding for government contracts for a period of 2 to 3 years.”

Rudi Klein added that if such a system had already been in place Carillion would have been excluded from government contracts.

However SEC Group believes that on payment security the government needs to go further and legislate to require that project bank accounts are put in place for all public sector projects. It also wants the government to back the Private Member’s Bill (now in the House of Commons) that will protect cash retentions.

“The Carillion debacle has revealed the appalling level of abuse heaped on construction supply chains,” Rudi Klein said. “We should also be considering the introduction of a statutory regulator to challenge the behaviour of large firms and, if necessary, fine them in the worst cases of abuse.”

Source: The Construction Index