making the difference

Analysing the UK construction marketplace

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November 2018

Turner & Townsend

Agenda

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Agenda

Introduction

UK market overview Output, order books & TPI

London & South East market overview

Market outlook, tendering conditions, procurementroutes, sector performance

Key challenges in the market Key challenges A tale of two Brexits

Chris QuickDirector

Kris HudsonEconomist

Turner & Townsend

Who we are

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Turner & Townsend is an independent professional services company

specialising in programme management, project management, cost and

commercial management and advisory across the real estate,

infrastructure and natural resources sectors.

With 108 offices in 45 countries, we draw on our extensive global and

industry experience to manage risk while maximising value and

performance during the construction and operation of our clients’ assets.

Turner & Townsend

Turner & Townsend in the UK

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AberdeenBathBelfastBirminghamBristolCambridgeCardiffEdinburghGlasgowLeedsLondonManchesterNewcastleNottinghamReadingSheffield

Teesside

Dublin

2,500People

£238.9mUK Revenue

£26.7mOperative Profit

Turner & Townsend

London Expertise

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Grosvenor Square Ltd

20 Grosvenor Square

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Lelana

Hans Place

3

Chalk Farm

101 Camley Street

4

BPSDC

Battersea Power Station

1

Grosvenor Estates

Biscuit Factory

7

Redrow PLC

Redrow Colindale

8

TfL

Nine Elms OSD

10

Damac

Aykon One

11

Red Door Ventures

Triangle Site

12

CGMA

New Covent Garden Market

9

LB Croydon

New Addintgton

14

Groveworld

Wallis Road South

15

Meadow Residential

Mill Hill

16

LLDC

Olympicopolis

13

LB Hackney

Tiger Way

18

Carter Jonas

Carrington Car Park

19

LLDC

East Wide & Sweetwater

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Capco

Various

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Luton BC

Marsh Farm

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Legal & General

The Crescent

23

Versant Homes Ltd

Compass House

24

Finchatton

Cheval Place

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Aviva

Friar Street

26

London & Regional

First Central Park Royal

27

HKSH

Peninsular London

28

LB Camden

Camden Infill Sites

25

Raingate Ltd

Chancery Lane

30

Teighmore

Shard & London Bridge

31

LB of Brent

Brent Civic Centre

32

Deerbrook

Sea Containers House

29

QDDC

Chelsea Barracks

6

Taylor Wimpey

102 Camley Street

5

CBRE Ltd

Century Portfolio

34

London & Regional

St Georges Court

35

City of London

Wood Street Police

36

IJM

Royal Mint Street

33

PWC

7 More London

38

Airbus D & S ltd

Airbus

39

BP International Ltd

BP Building

40

Ballymore

Embassy Gardens

37

KPMG

Various

42

Societe Generale

Project Marble

43

Capital & Counties

the Henrietta

44

Deerbrook

Medius House

41

Youth Hostel Association

YHA Stratford

46

All England Tennis Club

Wimbledon

47

Starwood Capital

Ace Hotel Shoreditch

48

CitizenM

Trinity Square

45

Capco

South Wells

50

L&G

Jackson Square

51

NEPRO

Romford Market

52

Capco

Opera Terrace

49

McArthur Glen

Ashford Outlet

54

Land Securities

West 12 Shopping Centre

53

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Construction output - National

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Contractor order books - National

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Regional tender price inflation

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Market overview – construction cost change

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Current market outlook

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Current market tendering conditions

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Procurement route trend

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Sector performance

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London Market Trends - Housing

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Output

New orders

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London Market Trends - Commercial

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Output

New orders

0

2,000

4,000

6,000

8,000

10,000

12,000

2000 Q1 2003 Q1 2006 Q1 2009 Q1 2012 Q1 2015 Q1 2018 Q1

Output: £ million

Source: Office for National Statistics (ONS) Annualised

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Key challenges facing the market

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A tale of two Brexits

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• Brexit uncertainty is impacting confidence, with 26.8% of contractors predicting a cooling market over the next 12 months in London

• Financial sector exporting its services internationally

• 2 in 5 financial firms have confirmed at least one relocation destination to Dublin

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Brexit – a tale of two cities

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Brexit – a tale of two cities

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Responding to challenges and opportunities

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• Strike a balance between supply chain scrutiny and supply chain engagement

Supply chain scrutiny vs engagement

• Uncertainty triggered by Brexit, raising the prospect of certain contractual

agreements being invalidated

• Baseline cost, scope, risk and schedule health check reviews; understand exposure

Contract health checks

• Single stage tenders can heap additional stress on a fragile, strained supply chain

• Collaborative contractor relationships, with robust project controls and intelligent

procurement, fairly distributing risk

Procurement route considerations

• Cooling investor demand, forcing contractors to bid lower and squeeze margins

• Long term skills shortage exacerbated by a shrinking pool of EU workers

• Limited supply chain capacity and greater exposure to risks of insolvency

• Modest TPI and high levels of competition – a client’s market

Turner & Townsend

UK major programme spend profile

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Chris QuickDirector, Cost ManagementTurner & TownsendOne New Change, London, EC4M 9AFt: +44 (0) 20 7544 4000 | m: +44 (0) 7950 857423e: chris.quick@turntown.co.ukwww.turnerandtownsend.com

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