2018 in construction: Building's review of the year - part one

It’s that time of year again. Putting up the Christmas tree. Sending out cards. Decking the halls with boughs of holly, or, more likely, cheap tinsel from Lidl – whatever works. But while some traditions can be tailored to fit, every child knows the most important ritual is the carrot, mince pie and brandy for Santa and his reindeer on Christmas Eve. How else can you expect to get a domestic skip full of exciting presents the following morning?

Unfortunately, on the evidence of the past year, the construction industry looks to have been guilty of putting out insufficient morsels to tempt Father Christmas and his helpers in 2017. Because many of the gifts forthcoming in 2018 were – let’s be honest – underwhelming.

The Christmas list, posted to Lapland in good time, had been pretty clear: construction wanted certainty on Brexit, a stable economy, quick resolution on necessary post-Grenfell regulatory changes, and no nasty surprises. What it got was the collapse of Carillion, a seemingly eternal winter, little Grenfell resolution and unending, agonising, uncertainty on Brexit.

The collapse of Carillion – pretty much the first present to be unwrapped – was undoubtedly the biggest but by no means the only unwelcome gift. Others included further company failures, the very public delays to the construction of Tottenham Hotspur’s new ground, and the cancellation of Crossrail’s expected 2018 opening.

Meanwhile the shock waves from Carillion continued to reverberate through the industry on projects such as the Aberdeen Western Peripheral Route bypass and the Royal Liverpool and Midland Met hospitals, as well contributing to the ongoing pain at contractor Interserve, which throughout struggled to withstand the impact on its finances of its own contract difficulties. 

Read more: Carillion collapse

Read more: Tottenham stadium

The bad weather at the start of the year may not have been a great surprise, but the continuation of sub-zero temperatures in many places until the end of March was the gift equivalent of toiletries from the 99p bargain bucket at Wilko. Snow and ice hit the industry’s output in the first quarter, right at the moment many clients paused to digest the implications of Carillion.

Of course, no one wants to be ungrateful. And the stocking – if not bulging – did contain some useful, albeit uninspiringly practical gifts. After the first three months, things – along with the weather – improved. Output picked up and sunshine brought some optimism as Help to Buy-supported home buyers flocked to sites. The government published a sector deal that contained spending commitments and, most importantly, sent a message that the government values and wants to help the industry.

But overall 2018’s gifts were the metaphorical cheap novelty sock: unlooked-for but wholly unsurprising. Dame Judith Hackitt’s review of fire safety regulations, for example, followed the thrust of her interim report from December 2017, recommending welcome process changes but making clear reform would be hard graft over several years. Brexit negotiations ebbed and flowed as cabinet ministers came and went, seemingly according to the political calculation of those involved rather than any sense of national interest. The whole spectacle conspired to be at once desperately farcical and matchlessly tedious.

As 2018 trundled to a close, negative sentiments again predominated. The bombshell of Crossrail – first delayed until late next year and this week put back until who knows when – was detonated, while political leadership teetered on the abyss, bringing the prospect of either a Corbyn-led government or a damaging no-deal Brexit – or even both – into view as distinct realities for 2019.

This year, let’s make sure the brandy is first-class, the carrots are fresh and the mince pies are from Waitrose. And maybe our stockings will bulge with goodies for 2019. Or heaven knows what awaits … 

Carillion

The collapse of £5bn-turnover Carillion was the mouldy satsuma in our stocking – not just the biggest construction story of the year, it was the biggest of the decade. The debt-laden contractor and support services firm – the second-largest in the industry – went into compulsory liquidation on 15 January after the government turned down its pleas for a £160m bail-out. 

One of the government’s biggest suppliers, engaged on numerous high-profile jobs, the fallout of its collapse was enormous and immediate, with 30,000 suppliers left out of pocket to the tune of £1.2bn. Nearly 3,000 employees lost their jobs, including hundreds of apprentices, albeit customers and rivals stepped in to save more than 10,000 other roles.

The collapse came after the business failed to recover from a shocking £845m profit warning that had been made the previous July, exacerbated by an alleged £250m unpaid debt for work undertaken in Qatar. The circumstances around this profit warning, and whether it was credibly the first moment that Carillion executives knew something was wrong, was thrown under intense scrutiny, with several separate inquiries launched into what went wrong. MPs on a joint parliamentary committee slammed Carillion’s directors for “recklessness, hubris and greed” following weeks spent grilling former Carillion executives, advisers and accountants in evidence sessions that resembled nothing so much as a public stocks.

As the politics rumbled on, clients and suppliers continued to deal with the real-world effects. The government was forced to bail out the two giant unfinished hospital PFI projects it was engaged on, the Royal Liverpool and the Midland Metropolitan in Birmingham. Carillion’s collapse was cited as a contributory cause in a number of company administrations, including Sammon Group and Aspin. 

While Carillion’s directors endured public humiliation, and former finance directors Richard Adam and Zafar Khan remain under investigation by the Financial Reporting Council, the chief executive at the time of the collapse, Keith Cochrane, has already bagged a new role – non-exec chair of Scottish engineer Score Group.

2018 winners

While the big stories of this year may all have come with a certain amount of negativity, there was also some good news to hit the construction sector during 2018. Stick with us.

A standout on the project front was the Fosters-designed Bloomberg building, which hauled in the accolades. The Sir Robert McAlpine-built project in the City of London earned Sir Norman Foster his third Stirling prize, scored the top gong at the British Council for Offices Awards and won Building’s own Project of the Year.

In contrast to its peers, Balfour Beatty repaid almost £253m of debt with cash that was available within the group. This means the contractor has paid down 45% of its gross debt in the last 12 months. And not a refinancing in sight.

Finally, the well-regarded Ian Lawson, the man who left the top job at Severfield due to poor health in January, re-emerged, taking up the position of chair at another steel specialist, Billington, in September.

Read: The Bloomberg Building, London

Come back tomorrow for part two of Building’s review of the year