Ten months on, Wimpey is dusting off plans to build the block of 119 apartments, aimed at City high-flyers for 拢100 000-300 000. And all the signs are that its sales team is about to be rushed off its feet.
Jarvis, the contractor on the scheme, declined to comment on the project, but Wimpey has confirmed that it is 鈥渞eviewing the situation鈥� and it is understood that Jarvis could be back on site by Christmas.
So, what has happened to change Wimpey鈥檚 mind? And is the rest of the industry back in boom?
One reason the industry is feeling so good about itself is house price inflation. Last week, the Nationwide revealed that prices were rising at their fastest rate for six years. As ever, London, the South-east and a few other hotspots are seeing the biggest surges, with more modest rises in other areas.
Construction orders are also increasing at a healthy rate. Again the picture was different last November: orders had slumped and the industry was anxiously hoping millennium spending would get it through the worst of the coming downturn. Last month, the Chartered Institute of Purchasing & Supply reported that orders rose for the 10th month running.
Bovis chief executive Luther Cochrane confirms these findings. He says: 鈥淚n the UK a year ago we would probably have been quite cautious. But the construction market continues to look good and the industry is in reasonably good condition, too.鈥�
Skills and materials shortages
Most observers say the increase in new work is being driven by the wealth of millennium projects and the South-east housing boom. But with the increase in work comes the problem of skills shortages and lengthening delivery times.
This month, the CIPS survey found that an increasing number of suppliers of construction packages were unable to expand capacity enough to meet short-term orders. Average lead times have lengthened for the fifth month running. The availability of subcontractors is a problem, allowing them to increase their rates. The CIPS also reported 鈥渁 perceived decline鈥� in the quality of subcontractors available.
Some industry sources echo these concerns. One project manager at a major consultant complained of a lack of bricklayers and other skilled labour in South Wales. He said: 鈥淚鈥檝e seen notices going up on town halls and church halls saying 鈥榖ricklayers wanted鈥�. That鈥檚 always the first sign of trouble.鈥�
A project manager for a small contractor that works in Manchester and the West Midlands said: 鈥淲e are paying up to 拢100 a week extra for bricklayers compared with six months ago, and we are finding them increasingly hard to find.鈥�
Shortages are not restricted to the trades. The managing director of one top 20 contractor said: 鈥淧roject managers and QSs are being poached. And we are having to pay upwards of 10% extra to hold on to our staff in those disciplines.鈥�
I鈥檝e seen notices going up saying 鈥榖ricklayers wanted鈥�. That鈥檚 the first sign of trouble
Project Manager
Hype or overheating?
So, all the signs are that construction is in boom, but is it about to overheat?
With the Bank of England鈥檚 Monetary Policy Committee meeting this week to decide any changes to the base interest rate, the question is at the top of the national economic agenda. If the bank does begin to apply the brakes, some pundits will consider the move overdue. Credit Lyonnais senior analyst Fred Wellings, for example, predicted that a rate hike would be made last month, when he warned that the housing boom would probably explode before the year was out.
A straw poll of the industry, however, reveals a rather more sanguine attitude to the market. Oliver Whitehead, chief executive of Alfred McAlpine, believes the newspapers have exaggerated the house price rises. He says McAlpine鈥檚 prices have gone up only 5% per square foot in the past 12 months.
He also dismisses any talk of a crisis in the supply of skilled labour. 鈥淓very summer, the industry has a big whinge that we can鈥檛 get enough bricklayers. You won鈥檛 hear us [McAlpine] complaining about that because it鈥檚 our job to manage the problem.鈥�
Bovis鈥� Cochrane has a similar view:
鈥淵ou constantly hear talk of skills shortages, but we don鈥檛 see a shortage. Having lived in the USA in 1995-97, when there was talk of an absolute lack of skilled tradesmen, I remember that all the work got done at the end of the day. There was even talk of the trade contractors putting the stories around to cash in.鈥�
Michael Coates, senior partner at QS Gardiner & Theobald, also says that talk of overheating is unfounded. 鈥淎s far as we can see, everything is ticking along nicely,鈥� he says.
But how long the boom conditions will last is not clear. Coates says: 鈥淲e see a lot of heat going out of the market next year.鈥�
Construction Forecasting and Research managing director Jacquie Cannon says: 鈥淓veryone is waiting to see what will happen to the leisure and entertainment sector post-millennium. In the past five years, it has become as large as the retail sector and is a massive area of construction spend. Many people are saying that the market has to come down as the projects dry up.鈥�
For most, however, the overwhelming feeling is of relief. Last year, it felt like the end of the world for businesses recovering from years of struggle.
