The UK construction industry is experiencing the worst slump in decades and it's not over yet. So is green building the answer to its woes? Louise Bateman reports.
Euan Cresswell, managing director of property developer Westmark, is a
green building convert. Last week, he collected a BREEAM Award for Horizon House, the new national headquarters for the Environment Agency. The building in the centre of Bristol is one of the greenest offices in the country, achieving an 85.06 per cent score under BREEAM (2006), the internationally recognised environmental assessment method for
buildings.
The conversion to building green has been somewhat forced upon Cresswell, who like everyone else in the industry has to achieve new sustainability standards to meet tough
carbon saving targets. Yet although hard work, it's a conversion he’s willingly making because he’s found a way to do it that’s commercially viable.
As he puts it, Westmark has created a building with the highest environmental standards “without the occupier paying a premium to go green.” In fact, Horizon House will save the Environment Agency around 10 per cent from operational and energy costs a year.
“I’m no life-long advocate of green,” admits Cresswell, “but as a business we saw the way the tide was flowing and we knew we had to find a way to make sustainable building commercially viable.”
So can ‘going green’ get the construction industry building again?
Well, the Government would certainly like it to. Nearly half of the UK’s carbon emissions come from the built environment and with every one in three homes being built between now and 2050, that’s a lot of carbon to be saved if the UK is to meet its 80 per cent cut in emissions target by then.
Zero carbon standards for new homes by 2016To that end the Government has said it will bring in zero carbon standards for new homes by 2016 and that the same standards could be applied to offices, shops, hotels and warehouses by 2019.
It wants to help kick start the industry to go green. Last month, it announced the start of the
UK’s “biggest ever” green home building programme with £60 million of funding earmarked for the country’s first four eco towns. It will help fund around 600 new eco homes over the next two years, all of them meeting a minimum standard of Level Four of the Code for Sustainable Homes and some Level Six, and supporting up to 2,000 new jobs and apprenticeships.
The Government has said another 65,000 jobs could be created through its new
green strategy for British homes, announced last week. This will see six million homes insulated by 2011 and all practical loft and cavity walls by 2015. By 2020 it intends that seven million homes will have had ‘eco upgrades’, such as solid wall insulation and renewable installations, such as air or ground source heat pumps or solar thermal.
To fund this, the Government is introducing a ‘pay as you save’ green
finance scheme that will allow people to use part of the money they save on bills, or the revenue from small-scale
renewables, to pay back the loan for the eco-upgrade.
"Revolution in household refurbishment"The industry has certainly welcomed these moves by the Government. The UK Green Building Council has described the pay as you save scheme as “radical” potentially triggering “a revolution in household refurbishment”.
The question is it enough to pull the construction industry out of the worst slump since records begun over 50 years ago?
Building activity fell by 12 per cent last year, and construction companies – many of which have been kept afloat during the downturn by big public sector infrastructure projects such as schools and hospitals – are preparing for more hard times ahead as the squeeze on public expenditure finally begins to take hold. Public sector capital projects account for a third of construction activity but capital expenditure is set to halve from £44 billion to £22 billion over the next three to four years.
Construction industry to start to see recovery in 2011Mike Peasland, group-managing director of Balfour Beatty plc, seems to speaking for many in the industry when he says it will be 2011 before the construction industry starts to see a recovery.
“There are more failures to come out of the recession,” he stated during a seminar on construction and the green recovery at EcoBuild, the world’s largest exhibition for the sustainable built environment, last week.
Ironically enough, one cause of some of these predicted failures could be the Carbon Reduction Commitment Energy Efficiency Scheme (CRC), which comes into force on April 1. Around 5,000 large organisations are expected to be covered by the 'cap and trade' mechanism, but there have been repeated warnings from business organisations, such as the CBI, that many of them are still unaware of their obligations and could be hit with fines of up to £5,000 for failing to register.
Peasland says the CRC is needed to get businesses to reduce their carbon emissions, but he concedes it could hinder the recovery of the construction industry.
Despite the gloomy outlook for the industry, though, there are glimmers of hope.
Taylor Wimpey, the UK's largest housebuilder by market value, said it expected to see a gradual recovery in the housing market in the UK when it announced a narrowing of full-year pre-tax losses for 2009, last week, while this week, Bovis Homes announced that it had returned to profit.
Exporting green building skills abroadMeanwhile, the Chartered Institute of Building (CIOB) says many of its members are finding opportunities to export their skills abroad.
“We are finding more buoyant markets abroad in countries such as Brazil, Mexico and China,” said a spokesperson for CIOB.
This is a view back up by Cresswell, who says the UK building industry is more switched on about climate change than many other countries and this is creating opportunities.
“General awareness about climate change is much greater here and that means our skills, especially on the design and development side, are exportable,” he says.
Repair and maintenanceMeanwhile, back at home, opportunities seem to be for the taking in the area of facilities management and repair and maintenance. These contracts offer better profit margins than construction work – which is typically between two and three per cent – and run over a long period of time. The construction group, Rok, for example, saw profits almost triple in 2009 after shifting away from new build into repairing existing properties.
Since 80 per cent of existing buildings will still be around in 2050 there is every reason to expect maintenance and repair work to continue long into the future. And when you add to the mix the Government’s new green strategy for British homes, you can see how low carbon refurbishment is going to be a key growth sector for the construction industry.
It is clear that the increase in demand anticipated, however, will open up a sizable skills gap and the Government is already promising a “new set of standards for workmanship and products to protect consumers from the threat of cowboy eco-builders and dodgy products”.
Balfour Beatty’s Peasland says the refurbishment work offers considerable opportunities for the construction industry, with the bigger companies managing the contracts, on the one hand, and the small to medium-sized businesses delivering on the other.
“There’s a lot of work here for the ‘white van man’, but the construction companies are also up for it,” he says.
On-site renewables Another side of the industry that is seeing opportunities for expansion is the one responsible for on-site renewables.
Encraft is an independent engineering consultancy based in the Midlands that specialises in microgeneration and low carbon buildings. Managing director Matthew Rhodes says business is already “significantly better than last year” and that his company has grown from six people to 20 in the last two years. He’s particularly upbeat about the ‘feed-in tariffs’ (FiT), which come into effect on April 1 and guarantee an inflation-linked income for on-site renewable energy projects under five megawatts in size for a period of up to 25 years. Rhodes says the opportunities being presented by FiT for companies such as Encraft, which works across the domestic and commercial sectors, are “massive”.
Meanwhile, Westmark's Cresswell is hoping the drive for low carbon building solutions will lead to more “sensible times” for the building industry. “Hopefully, we won’t see a return to the boom times, but we need a steady flow, particularly in housing,” he concludes.
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