SOUTH WEST
The new Labour government’s commitment to construct 1.5 million homes over the next five years, while largely unsubstantiated at present, should encourage continued activity in a highly desirable region for homebuyers. But the current planning system requires a number of policy changes to enable the government’s bold proposals to meet their target by 2029.
The South West’s construction industry will also need to recruit and train thousands more workers to cope with the extra demand in hotspots such as private housing, repair and maintenance, and infrastructure.
MARKET CONDITIONS & PIPELINE
Planning reforms welcomed as labour shortages continue
The South West’s construction industry has widely welcomed the new government’s housing and planning reforms. Planning is still very slow in the region with projects being held up by low resource levels within local authorities.
Investors and developers, however, are aware of planning issues and remain positive, leading to an increase during the quarter in the number of feasibility studies being undertaken. Project starts are also slightly up this quarter.
Labour shortages continue to increase costs. Hinkley Point C still needs heavy resourcing, but other major projects such as Tata’s EV battery factory will also soak up labour. While other regions are predicted to have stronger growth, the South West is set to be the region with the biggest need for workers, with CITB saying an estimated extra 43,000 workers will be required by 2028.
Main contractors are continuing to bid for work in the South West, with several large projects that have been in planning for several months now being approved. Insolvencies remain a high risk and there are reports of regional hotspots where insolvencies are impacting local supply chains. Market discussions suggest that lower interest rates, when they come, will help to strengthen the viability of projects.
RLB Market Activity Cycle
The RLB Market Activity Cycle is a representation of the development activity cycle for the construction industry.
RLB considers 10 sectors to be representative of the construction industry as a whole. Each sector is assessed as to which of three activity level zones – peak, mid or trough – best represents the current status of the sector within the cycle. This assessment is then refined by identifying whether the current status is in a growth phase or a decline phase.
The subjective current performance of sectors is identified by ascribing one of the coloured arrows (shown in the legend of the chart) to each sector. NB: In this analysis, sectors are not individually weighted.
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Market sector activity analysis: South West
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Consolidating the results of a region enables the calculation of a regional representation of percentage of sectors in each phase of the cycle at a point in time.
Market sector activity analysis: United Kingdom
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Consolidating the results of multiple regions enables the calculation of a national representation of percentage of sectors in each phase of the cycle at a point in time.
TENDER PRICES
Inflation to stabilise as tendering becomes more competitive
Tender prices remain high across the region, although these are stabilising. A steady adjustment in construction inflation to more typical levels is expected, with demand-led inflationary pressures being offset somewhat by reductions in material prices overall.
The change in government may boost public spending on projects in the next year and thereafter, which in turn will likely affect tendering contractors’ view of the market and their pricing, especially as skills shortages continue to impact labour costs.
Tendering is becoming more competitive and main contractors are reporting a slight increase in anticipated projects going to tender over the next 12 months, compared with the previous 12 months.
Tender price change
▉ RLB South West
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- The market is reporting three consecutive quarters of price falls for construction materials. Insulation, wood and curtain walling, however, are among the materials seeing price increases.
- Falling materials cost inflation is being offset by rising wage inflation due to skills shortages.
- M&E is experiencing higher inflation than building work. The reasons for this include supply chain pressures, a shortage of skilled labour, and the price of key M&E materials. Pricing of plant and equipment is heated due to imported plant inflation.
SECTOR FOCUS
Education
In March the previous government announced £1.8bn in funding for 2024-25 to improve school and sixth-form college buildings across England. As part of this, the South West will see 49 schools receive a total of £18.2m through the Condition Improvement Fund to complete larger improvements to schools such as upgrading heating systems, replacing roofs or rewiring electrical systems.
Energy
Investors and developers in the South West’s energy sector are optimistic about new development opportunities arising from the newly announced partnership between Great British Energy and The Crown Estate. This partnership will see the public sector taking on a new role undertaking additional early development work for offshore wind projects, ensuring that future offshore wind development has lower risk for developers and enabling projects to reach completion quicker.
Infrastructure
A key focus of Bristol City Council is improving public transport infrastructure and active travel methods in and around the city centre. There are proposals for a full-length bus lane for the Portway to improve connectivity, building on previously delivered metrobus schemes. Plans to reopen rail lines between Portishead, Pill, Avonmouth and Temple Meads are in development.
Residential
Strong residential demand is still evident across the South West. Exeter and Bristol have seen a great deal of interest in residential schemes, with several schemes in planning due to start in late 2024 or early 2025.
BRISTOL, UK
Flagship PBSA development
RLB is supporting Cubex, a leading regional real estate developer, with cost management services on a new 22-storey purpose-built student accommodation development in the centre of Bristol.
The scheme will provide up to 530 student bedrooms across a mixture of cluster and single units. Situated adjacent to the River Avon, it will help to regenerate the local area and form part of the city’s long-term flood defence plan.
The development, which will connect to Bristol’s heat distribution network, is targeting a BREEAM ‘Excellent’ rating for its sustainability performance. It will be one of the first buildings in the South West to undertake the Building Safety Act’s Gateway 2 approval process in early 2025.
