In July, we brought together senior leaders from across the city of Bristol and South West England to discuss how we can ensure long-term investment and development in Bristol and deliver large-scale programmes of work in the future.
Our theme was inspired by Arcadis’ recent International Construction Costs 2022 report, which provides insights into how fast-rising construction costs are impacting the feasibility and viability of construction schemes in the UK and around the world. The three big themes to come out of the report were: rebound, disruption of supply chain, and the way in which workers changed their behaviours. These areas have changed how the construction markets around the world work.
I was delighted to chair the event, joined by Simon Rawlinson, Head of Strategic Research and Insight at Arcadis, Councillor Tom Renhard from Bristol City Council and Jez Sweetland, Project Director at Bristol Housing Festival, who were guest speakers for the event. The roundtable was attended by high-level regional stakeholders from both public and private sector clients, including Councils (Bristol City Council, North Somerset Council), education institutions (University of the West of England, University of Bristol),transport infrastructure operators (Bristol Airport, Network Rail), as well as developers, designers, contractors, investors and enterprises (Bristol Housing Festival, Bouygues, Bristol and Bath Regional Capital, HTA Design, HBD, YTL Developments, Hill and Vistry).
The rise in construction costs in Bristol and beyond
Bristol is one of the most expensive places to build in the UK, and the UK is one of the most expensive places to build in the world. As costs continue to rise, what needs to happen to ensure we can deliver Bristol’s large programme of works – from building new housing and delivering commercial retrofit programmes, to undertaking climate adaptation schemes?
Like other cities, Bristol faces an ongoing challenge around being able to bring forward the volume of housing needed in the city to sustain the needs of our citizens, and with up to 18,000 people currently on the Council housing waiting list this is a pressing challenge. There is an emerging view in the city that more traditional routes to viability need to be challenged as we look to the principles of the Value Toolkit to unlock investment and accelerate delivery of much needed housing and infrastructure.
At present, there is little evidence that markets are slowing down, which means that construction costs are unlikely to fall. What options are available to clients to enable them to bring forward much needed development?
Cost of living crisis driving demand for housing
Couple the rise in construction costs and the cost-of-living crisis, and we have the perfect storm. There’s an urgency to get housing built quicker and a need for more affordable housing. In Bristol, there are currently over 1,100 households in temporary accommodation and Bristol City Council is back in a budget challenge trying to find out how they can find £15 million of savings a year.
There’s a huge amount of investment potential in Bristol and the Council needs to work with industry to speed things up. However, industry also needs to think about how we integrate social value into developments and how new developments will provide jobs for local people.
However, Arcadis’ Simon Rawlinson stated that recovery from the pandemic and housing crisis is dominated by infrastructure and building more housing, noting that recently published output data revealed that the UK housing market is booming, having gone up by about 5%. He added that we need to keep an eye on Chinese market; Chinese real estate is 25% of Chinese GDP and is currently slowing down. Less demand in China could have quite a big impact on the availability of raw materials globally, which might help to keep a lid on current high levels of inflation.
Our speakers agreed that we need to think about how we build the idea of healthy cities into placemaking and how we design with mental and physical health in mind so that we don’t place extra pressure and cost on the NHS. A more effective investment in this area could save £1.3 billion a year in costs to the NHS, it was noted.
A key aspect to the wider challenge is the sustainability crisis. Part of this is the social justice problem of people needing homes being overlooked. Our speakers noted that it’s important to have investment partners who share the same values in Bristol, such as sustainability credentials.
There is the need to incorporate communities into redevelopment, making sure they’re valued and not pushed out; social values must not be compromised at the expense of larger financial values.
A narrative that builds trust
A strong theme across the board was the importance of developing a conversation around cost that has a narrative built on trust. This, our speakers agreed, is a challenge that needs to be tackled, so we all need to work with our construction partners.
During these times of high inflationary pressures, preserving supply chains, securing market engagement, and ensuring that promoters and developers have access to the skilled contractors that are needed, we need to have more transparency on how risks are owned and managed. Careful consideration into how we protect tier 2 and 3 subcontractors from insolvency is needed, and we must create an environment of trust to ensure that the whole project team deliver.
Bridging the skills gap to increase capacity
It’s no secret that we have a construction skills crisis in the UK, and Bristol is no different.
The industry has an ageing workforce and attrition through retirement is accelerating. With demand for construction labour increasing by over 50,000 per annum, the lack of skills could trigger further inflationary pressure.
Increasingly we need to treat workers as a rare commodity that need to be deployed with care to maximise the impact. We heard some great examples of where organisations are now pivoting to offsite and modern methods of construction (MMC) in a way to experiment to help improve productivity and make the most of the skilled workforce available.
Our speakers were passionate about Hengrove Park, one of the biggest housing projects coming forward in Bristol which will deliver 1,600 homes. Nearby to the site, there will be an offsite construction skills college challenged with creating jobs for the future, recruiting people into this development project and utilising local industry expertise.
Meanwhile, universities have hugely contributed to the city but there have been pressures with so many undergraduate and masters students who have demand for rental properties. However, there are concerns around the impact of Brexit on this because fewer European students will choose to study in the UK and Bristol, in particular.
What can stakeholders do
As part of its International Construction Costs 2022 report, Arcadis has pulled together a Five Point Plan: getting clients to react to volatile conditions in a consistent way. The plan notes that we need to think about resilience of projects and doing more with less, ultimately optimising projects. In Bristol, where it is so important for client and project team to collaborate to deliver viable and liveable low-carbon development, the Five Point Plan is a useful reminder of how high performing teams can contribute to project success.
The report highlights the importance of progressing the use of MMC as part of the solution. Our speakers noted the benefits of MMC in delivering new homes in Bristol, and social housing in particular, by providing more quality assurance, reducing the carbon footprint of buildings and creating stable jobs in the same location.
As Jez Sweetland commented: “The opportunity to pivot some of our local housing supply chain from a traditional build process to a manufacturing process looks well set to provide an increase in productivity and to build with design processes that will improve and help drive our zero-carbon ambition. In the short term, perhaps the biggest challenge that impedes that is the higher build costs of MMC but increasingly there is a recognition of the wider benefits of investing in MMC and how it can strategically support jobs, the green skills agenda and builds towards a local industrial strategy to deliver quality and affordable homes at pace.”
There was consensus at the roundtable about the importance of maintaining the quality of product as a means of securing long term value, which is even more pertinent now given the current levels of inflation and rising cost of construction products.
In summary, Councillor Tom Renhard noted: “There is a lot going on in Bristol and a lot of investment opportunities within the city. We need to work together with all partners on the developments coming forward to think about how they will provide social value and wider benefits to the city, including creating local and diverse jobs for communities”.
Our speakers are looking to create the environment for investment to solve the challenges identified at the roundtable and ensure that the citizens of Bristol realise the opportunities to have access to a good home, the jobs they need and a fulfilling life for their families. Ultimately, they want Bristol to be a place where no one is left behind.