Key construction sectors could gain from a hard Brexit

Latest News Wed, Oct 10, 2018 3:47 PM

Concerns over the impact on the construction industry of Britain leaving the EU without a deal have inevitably been heightened as the March departure date looms.

But whilst business confidence is fragile, there are signs that some key construction sectors could prove resilient or even gain from a hard Brexit.

The prospect of congestion at the ports – particularly Dover - and an end to ‘frictionless’ trade may create tender opportunities as UK ports invest more in upgrading and enhancing their facilities. To date, Brexit has not deterred investment on the quayside.

Last month ABP, Britain’s largest port owner, unveiled proposals for Humber International Enterprise Park; one of the largest port development sites in the UK covering 453 acres and which it hopes will attract major distribution and manufacturing businesses.

Meanwhile, work got underway earlier this year on a £32 million expansion at the Port of Felixstowe (Glenigan Project ID: 17104784), which will significantly increase capacity at what is the UK’s largest container port.

The weaker pound ushered in by Brexit could also provide a further lift to the numbers of tourists visiting the UK, giving a boost to hotel construction programmes. For now, the pace of expansion at budget hotel chains shows little sign of slowing. Having recently opened a 395-room hotel in the City, Travelodge is currently investing £82 million in building projects involving four hotels in London. Moreover, it is looking for a further 100 sites across London to open hotels, which will create further tender opportunities.

New hotels capacity is also being built in the regions. Glenigan Construction data shows a contract has recently been signed on the £15 million Moxy Hotel in Manchester (pictured) with work set to start on the 21 month project later this year (Glenigan Project ID: 16135782).

The prospect of Britain leaving the EU customs union could also provide a spur to the domestic industrial building/logistics sector, particularly as manufacturers and retailers seek to maintain larger volumes of components and supplies closer to home.

Although the national picture is mixed, the demand for warehousing and logistics space is continuing to expand in key manufacturing regions. The latest Glenigan Construction data shows that the value of detailed planning approvals for industrial projects in the seven months to July 2018 rose by 115% in the East of England compared to the period last year and by 147 % in the North East. On the same basis, industrial planning approvals were up by 84% in London, 77% in the North West and 30% in the West Midlands.

These figures chime with recent regional market surveys highlighting the potential in the industrial construction sector. Around Peterborough for example, where Amazon, Debenhams and Ikea all have major distribution centres, a recent Savills report showed the vacancy rate for industrial space was running at a historic low of just 2.2 per cent.

The industrial development market looks particularly healthy around the Home Counties. Glenigan Construction data shows work has recently started on a £7.6 million scheme at Symmetry Park in Bicester (Glenigan Project ID: 18035400) where Db Symmetry is building 14,200 sq m of warehouse space.

With its recent results, Kier Group noted that the industrial sector remained buoyant with strong occupier demand and robust investor sentiment. The firm’s property arm has started work on new sites in Basingstoke and Reading and secured further sites in Chelmsford, Gravesend, Solent and Maidenhead with construction due to start over the coming year.

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