Guest Blog: Russell Bolton, Managing Partner - Rider Levett Bucknall UK

Written by Russell Bolton

With MIPIM (12-15 March) nearly upon us, many of those working in the construction and property sector will be wondering what the next year ahead will mean to their industry. With still no deal on the table for the UK and the 29 March deadline two weeks exactly from the end of MIPIM there will be much talk about how the UK continues to operate post its inclusion in the EU.

There are two pressing concerns. Firstly, the fact that 60% of all imported construction materials that presently are sourced from the EU could face tariffs and transportation barriers and secondly, the questions over the EU workers’ rights and the availability of EU labour on UK construction sites.

But what does this mean for those of us working within the North West? Manchester’s Northern Powerhouse status continues to drive the region’s development, and the key theme is that of continued high levels of building and construction activity. Tender price inflation is within expected bounds, and we anticipate that this situation will continue. Contractors’ and sub-contractors’ margins are remaining tight, given the availability of workload, likely due to significant materials and labour costs increases set against that backcloth and considering the continued uncertainty.

The high volumes of new-build works continue to be matched by correspondingly high levels of repair and maintenance work, which has resulted in a construction economy operating at near to capacity and in some respects, in excess of capacity. A feature facet of this is the current high level of output of residential accommodation, the construction of which is fundamentally more labour-intensive than work in some other sectors. However, running alongside is the equally buoyant higher education sector, which is growing, and building, rapidly both in Manchester and its surrounding areas.

Supply Chain

Whilst high workload levels are to be commended, there is also a danger of significant cost inflation as contractors’ order books reach or breach their capacity levels. Perhaps offsetting this, or certainly damping it, may be the uncertainty of the current political position, to the extent that reasonably priced turnover is to be preferred to the possible alternative should the pipeline dry up later in the year. On the other hand, we are not seeing evidence of “panic-buying” of work on the part of contractors, merely reasonable pricing in the context of the continuing uncertain outcomes. The price spikes that we had anticipated might arise have not eventuated yet, although we continue to monitor the situation carefully.

The RLB team attending MIPIM from Manchester include myself, Chris Hartley, Partner and Steve Gillingham, National Head of Public Sector. We are keen to support all those working in the property and construction sector through Brexit and beyond and work collaboratively to bring longevity and resilience to the industry. To arrange a meeting during MIPIM, email melanie.fox@uk.rlb.com or email the team directly.