Professional Documents
Culture Documents
Construction Industry resources
Gareth Jones
Senior Policy Officer
Commerce and Employment Department
January 2009
Contents
1. Introduction ........................................................................................... Page 3
2 Executive summary – main points arising
from the survey ...................................................................................... Page 4
3. The need for an assessment of demand for
Construction Industry resources – the Capital
Prioritisation Debate .............................................................................. Page 5
4. Survey aims and methodology used ....................................................... Page 6
5. Overview of the Construction Industry .................................................. Page 8
6. Survey results ........................................................................................ Page 11
Quantitative data:
Work underway compared to one year ago .............................. Page 11
Turnover in 2009 compared to 2008 ......................................... Page 12
Work underway in next 18 months ........................................... Page 12
Predicted future construction projects ...................................... Page 13
Qualitative results:
Opinions of developers ............................................................. Page 17
Opinions of professional services – architects
and surveyors ........................................................................... Page 18
Opinions of building contractors and suppliers
of building materials ................................................................. Page 20
7. Summary and conclusions ...................................................................... Page 22
8. APPENDIX 1: Dynamics of the Construction Industry .............................. Page 23
9. APPENDIX 2: Acknowledgments and further information ...................... Page 27
2
1. Introduction
1.1 This report presents the results of an assessment of demand for Construction Industry
resources. The survey was conducted by the Commerce and Employment Department
in January, 2009. It provides a snapshot of the current state of the Industry obtained
through a series of interviews with key players in the industry.
1.2 The report on the survey is divided into a number of sections comprising:
• The rationale for the survey;
• An overview of the local Construction Industry and how it operates;
• Quantitative and qualitative results of the survey.
1.3 The report has been endorsed by the industry representatives of the Construction
Sector Group as giving a reasonable “qualitative” assessment of current
circumstances in the construction sector. With the current economic uncertainties it
is not possible to get a more “quantitative” assessment for anything more than the
next 6 months or so.
1.4 However, it is recognised that the report presents one snapshot in time and therefore
the report will be further validated through continued liaison with the Industry
through both the Construction Industry Forum and the Construction Sector Group.
3
2. Executive Summary – main points arising from survey
• The Construction Industry generated income of £131.4m in 2007 and employs over
3,000 people. It is Guernsey’s fourth largest economic sector, and an important
opportunity for self employment for many islanders
• A vibrant and successful indigenous Construction Industry is an essential ingredient of
a prosperous economy.
• The nature of the industry is such that long term predications on future activity are
not generally known, but many key players in the industry are expressing caution and
planning for difficult trading conditions.
• There has been a reduction in the number and project value of large scale commercial
projects – a sign that the difficult economic conditions being experienced worldwide
may be starting to be felt within the local Construction Industry.
• Proposals for residential building projects seem to be holding up well, but an obvious
concern exists if these projects are not translated into building projects.
• As a consequence of the reduction in large scale commercial projects, there is now
more competition amongst building contractors for medium to large scale residential
projects.
• Sub‐contractors and small general builders are likely to be affected worse by any
contraction of the industry, as medium to large contractors seek work in the medium
build residential area.
• The cost of materials, labour and business overheads remain largely fixed, and in
some cases are still rising.
• There is significantly less confidence of current workloads being maintained in the 12
to 18 month period. This view is particularly true amongst building contractors, who
are not seeing the same level of commercial contracts that existed 12 months ago.
4
3. The need for an assessment of demand for Construction Industry
resources – the Capital Prioritisation Debate
3.1 At its meeting in March 2008, the States debated the Government Business Plan, and
agreed inter alia:
“to approve the intended restructuring of the Government Business Plan to enable a
five phase process for corporate planning and resource prioritization…”
3.2 The Capital Prioritisation debate is scheduled to take place in March 2009, at which
the priorities for States capital spending will be debated.
3.3 The Commerce and Employment Department and the Construction Sector Group
(CSG)1, considered that the Capital Prioritisation debate will need to be debated in
the context of a “bigger picture” which includes the needs of the economy as a whole.
Whilst the States has limited funds, it was felt that the current difficult economic
conditions may result in a reduction in the number of private sector construction
projects causing an overall drop in demand for Construction Industry resources. This
may affect the long term sustainability of the Construction Industry.
3.4 The “Constructing the Future” Report (Board of Industry, April 2002), argued that a
vibrant and successful indigenous Construction Industry is an essential ingredient of a
prosperous economy and makes possible:
• the provision of schools, clinics, hospitals, houses, roads and sewers;
• an infrastructure for the growth and development of society and encourages
investment in its future;
• high quality buildings required by the finance industry;
• the development of other sectors such as e‐business, retailing and tourism by
providing the specialist buildings they require.
3.5 The loss of a substantial part of the local Construction Industry could be damaging to
the economy in the long term, especially when the current economic conditions
improve and there is increased demand for Construction Industry resources.
3.6 Many interviewed in the process of the current (2009) survey felt that as a key client
of the industry, the States of Guernsey had a key role to play in ensuring the long
term viability of the industry, by ensuring that a number of capital projects occurred
during the current difficult economic climate. It was hoped that the Capital
Prioritisation process would be beneficial in this regard, and enable the industry to
better plan its workload
1
The CSG is a group containing political representatives from Commerce and Employment, and Treasury and
Resources as well as representatives from the Construction Industry.
5
4. Survey aims and methodology used
Survey aims
4.1 The aim of the survey was to provide an assessment of the demand for Construction
Industry resources within the Island over the next 12 to 18 months. In particular, the
survey asked information on:
• Current workloads being experienced by the industry
• Indications of future workloads over the next 12 to 18 months
• Indications of future labour requirements over the next 12 to 18 months
• Basic details of construction projects either underway or in the planning process
over the next 18 months.
4.2 An opportunity was also taken, by talking to key players in the industry, to gain an
understanding of how they felt the industry was faring, and in particular any concerns
that were emerging which might affect the future viability of the industry on the
Island.
4.3 The overall purpose of the survey was to gain, through a series of informal and
confidential interviews with key players in the industry a feel for the current
vibrancy of the industry. What did businesses feel the future looked like? Did they
have concerns, and what difficulties were facing the industry in the immediate
future? The project brief did not include a detailed analysis of the use of labour (and
particularly the use of imported or off‐island labour).
Survey methodology
4.4 For the purposes of this study, it was considered that a series of short interviews with
key players in the industry would be the best way of finding out how the industry was
currently faring.
4.5 A series of interviews with key players in the industry was held over the course of two
weeks. These interviews were largely qualitative in nature, although some
quantitative data was collected (for instance on the work underway at present
compared to one year previously and also predictions of future activity up to 18
months into the future).
4.6 The total turnover of those Building Contractors who were interviewed during the
survey amounted to £85m, a significant proportion of the estimated factor income of
the industry of around £131m (see Table 1 on page 9). Therefore the results from the
survey can be seen as being representative of the Industry as a whole.
6
4.7 Details of major construction projects (with a value of over £200,000) were also
collected in order to gain an understanding of the volume of construction activity, and
the type of projects that were underway. These types of projects account for a
significant portion of Construction Sector activity, and act as a barometer for the
industry as a whole
4.8 Details of projects of a value under £200,000 were not collected during this survey,
because any attempt to collect information on every type of domestic construction
activity from conservatories to routine maintenance would have been unrealistic
given the time frame and the resources available for the project. However, using data
collected in the 2005/6 Guernsey Household Expenditure Survey, it is estimated that
household spending on major household improvements and repairs and maintenance
was approximately £85m.
4.9 The significance of the data collected on major projects over £200,000 in value is,
however limited. Without a prior survey it is not possible to benchmark the data to
ascertain whether the demand for resources has increased or decreased. The data
has been collected at this stage in anticipation of future surveys, which would enable
comparisons to be made, and for trends in the demand for Construction Industry
resources to be more accurately measured.
4.10 In assessing what data sources were available for the survey, a study of applications
to the Environment Department was considered, and in particular an assessment of
the Permit Tracker system was undertaken. It was considered that this would give
some useful information on construction projects underway on the Island. Whilst it is
anticipated that the system could provide useful statistics in the future, further work
was being undertaken by the Environment Department to enable that data to be
more accessible. For this survey, data on major construction projects has been
obtained directly from key players in the industry.
7
5 Overview of the Construction Industry
Size of the industry – income earned, numbers employed, size of businesses
5.1 The Construction Industry is a significant part of the local economy, ranking fourth
out of eighteen economic sectors, both in terms of income earned and numbers
employed.
Income earned by the Construction Industry
5.2 In 2007, the Construction Industry generated income2 of £131.4 million. It is the
fourth largest economic sector, accounting for 8.8% income in the Island (see Table
1).
Table 1: Factor incomes of top five economic sectors at 2007 values
Economic 2003 2004 2005 2006 2007 % of whole
Sector £ £ £ £ £ economy
(2007
figures)
1 Finance 460,510 466,834 491,814 519,281 527,537 35.2
2 Public Admin 97,572 100,985 104,795 166,403 181,162 12.1
3 Business 119,646 141,809 143,187 150,181 168,200 11.2
Services
4 Construction 129,321 131,411 127,201 125,612 131,430 8.8
5 Retail 118,376 122,366 120,626 124,853 118,022 7.9
Whole 1,398,927 1,433,708 1,424,534 1,464,689 1,497,600 100.0
Economy
Source: Guernsey Facts and Figures 2008, Policy Council
Numbers employed
5.3 In terms of employment, as at September, 2008, there were 3,068 persons employed
in the industry, of which 2,223 were employees and 845 were self‐employed (see
Table 2). This represents 9.3% of the Island’s labour force,
2
Income comprises of wages paid to employees (remuneration) and income earned in the form of net assessable
profits by businesses and the self employed. Together these are known as “Factor Incomes”.
8
Table 2: Employment numbers of top five economic sectors (September, 2008)
5.4 It is of note that the Construction Industry has over twice as many self‐employed
persons (845) as any other sector. The next largest sector in terms of the number of
self‐employed persons is the Retail sector at 353. The Construction Industry therefore
provides important opportunities within the economy for persons to run their own
business.
5.5 In terms of employment by gender, the industry is predominantly male, with 2,949 of
the workforce of 3,068 being of this gender.
Size of businesses in the Construction Industry
5.6 Of the 2,354 businesses in the Island, 403, or 17.1% were based in the Construction
Industry (Table 3), the highest number of all 18 economic sectors. However, most
businesses within the industry are small in scale, that is employing only 1 to 5
persons. There were 290 businesses in this category – 72% of all businesses in the
Construction Industry. Only 6 businesses employed more than 51 people.
5.7 Therefore the profile of the industry is one that is dominated by small to medium
sized businesses, with a few larger players.
Table 3: Size of organisation by economic sector (top 5) as at September, 2008
Number of persons employed by organisation
9
Make up of the Guernsey Construction Industry
5.8 Guernsey’s Construction Industry can be divided into three tiers:
• 1st Tier – Large Construction Companies (generally employing over 50 permanent
staff and able to bid for contracts over £2m in value)
• 2nd Tier – Small to Medium sized contractors (generally employing 10 to 50
permanent staff and bidding for contracts up to £2m)
• 3rd Tier – Small general builders and specialist contractors (sub‐contractors)
(generally employing less than 10 staff)
5.9 The contractors form the core of the industry, but allied to this is the provision of
specialist professional services for the industry including:
• Architects (Chartered and architectural technologists)
• Quantity surveyors
• Building surveyors
• Engineering services
5.10 The industry also has a number of material suppliers who provide building materials
and specialist fittings including inter alia:
• Concrete, sand, cement
• Plasterboard
• Timber
• Electrical fittings
• Plumbing and heating fittings
10
6 Survey results
Reporting of survey results
6.1 The reporting of the results from the survey is divided into two sections:
• Quantitative data – answers to specific questions asked of all survey participants.
• Qualitative data – general opinions and expressions of points of view gained
through interviewing businesses.
Quantitative data
Work underway compared to one year ago
6.2 Businesses taking part in the survey were asked how their current workload
compared to this time last year (that is 2009 compared to 2008). For the industry as a
whole, 59.1% of businesses felt that the workload was about the same as 2008, and
27.3% reported that their workload was over 5% higher than in January 2008 (Table
4).
6.3 However, 13.6% reported that their workload had fallen compared to this time last
year, with 9.1% reporting that work had fallen by over 5%.
Table 4: Current workload compared to one year ago
Industry Total
Up over 5% 27.3%
Up 0 to 5% 0.0%
About the same as now 59.1%
Down 0 to 5% 4.5%
Down over 5% 9.1%
Total 100.0%
6.4 It should be noted that Table 4 reflects the views of the industry as a whole, including
those of developers, architects and surveyors as well as building contractors. The
feedback from building contractors was more pessimistic than the industry as a whole
(see paragraphs 6.39 to 6.48 for qualitative responses), with 71.4% reporting that
their workload was the same as last year, 14.3% reported it had fallen and 14.3%
reported that it had risen. Of those who reported an increase in their workload, one
contractor reported that their current workload would be considerably lower, were it
not for the presence of one large project.
11
Turnover in 2009 compared to 2008
6.5 Businesses were asked what they felt their business turnover would be in 2009
compared to 2008. 45.5% felt that their turnover would be the same as 2008, whist
31.8% felt that their turnover would increase in 2009 (Table 5).
6.6 However, 22.7% of businesses felt that their turnover would be lower in 2009, with
13.6% indicating that their turnover would be over 5% lower. Contrasting this with
the figures in Table 4 indicates that whilst some businesses felt that their workloads
would be similar in 2009 to 2008, they would be generating less turnover from this
workload, and would therefore be involved in smaller scale projects.
Table 5: Turnover in 2009 compared to January 2008
Industry Total
Up over 5% 18.2%
Up 0 to 5% 13.6%
About the same as now 45.5%
Down 0 to 5% 9.1%
Down over 5% 13.6%
Total 100.0%
Work underway in next 18 months
6.7 Businesses were asked to estimate what they considered their future workloads
would be in the next:
• 1 to 3 months
• 3 to 6 months
• 6 to 12 months, and
• 12 to 18 months
6.8 Figure 1 shows that confidence of maintaining the current workload falls away as
time progresses, so that there is significantly less confidence in the 12 to 18 month
period. When considering these results, it should be understood that the nature of
the Construction Industry is such that long term predictions of future activity are hard
to make, especially for building contractors who tend to work to shorter time frames
than do developers or architects. Nevertheless, it is apparent from the reported
results in Figure 1 that there is increasingly less confidence further into the future,
particularly beyond 12 months. The reasons for this fall in confidence are examined in
more detail elsewhere within this report when the qualitative responses are analysed
(see section 6.16 onwards on page 17).
12
Figure 1: Predicted changes in workload ‐ all industry sector including professional
services
Predicted changes in workload - All Industry sectors
70.0
Up over 5%
60.0 Up 0 to 5%
About the same as now
50.0 Down 0 to 5%
Down over 5%
% of industry
40.0
30.0
20.0
10.0
0.0
1to 3 3 to 6 6 to 12 12 to 18
Months into the future
Predicted future construction projects
6.9 During the survey businesses were asked to provide details of large construction
projects (with a value of over £200,000) in which they were either:
• Currently involved; or
• Likely to be involved with in the next 12 to 18 months.
A description and basic details of each project were obtained in order to avoid double
counting of projects.
6.10 There are a number of important points that should be considered when looking at
this data. The data has been included in this report to illustrate a number of
important points in order to place the qualitative information presented elsewhere in
this report into context. It is extremely important that the following points should be
borne in mind when looking at this data.
• The first point is that as these are anticipated building projects, it is extremely
unlikely that all of these projects will mature into live building projects
(especially given current economic conditions).
13
• Another point to bear in mind is that because a survey of the whole industry
was not conducted, not all projects will be listed, and not those of a value less
than £200,000 (see paragraph 4.8). Nevertheless, it is likely to cover the
majority of major building projects, and is indicative of the types of projects
being built.
• A third point to note is that the volume of construction projects drops away
over time. This is a normal facet of the Construction Industry, because
knowledge of which projects will be constructed is less certain when looking
further into the future. As time progresses and it becomes more certain that a
project is going ahead into the construction phase, the peak of projects shown
as occurring in 2009 is likely to move to the right as time progresses. In other
words, the next 6 to 12 months will always indicate more projects underway
than will be apparent in 12 to 18 months’ time.
• There is currently no comparative data available, so it is not possible to place
these figures into context. It is not known whether the number of anticipated
projects is “normal” for the industry, represents a rise, or is showing a
decrease in activity. Similar surveys to this at regular intervals would need to
be carried out to bring the data into context. With just one sample point in
time, the graphs should therefore NOT be used as a definitive gauge for
future demand trends in the industry.
6.11 With these important caveats in mind, the graph in Figure 2 shows that:
• The majority of building projects are residential in nature; and
• There are relatively few commercial projects.
14
Figure 2: Number of anticipated building projects
80 Mixed Development
70 Commercial
Number of projects
Residential
60
50
40
30
20
10
0
Jul-09
N ov-09
Jul-10
N ov-10
Jul-11
N ov-11
Jan-09
May-09
Jan-10
May-10
Jan-11
May-11
Jan-12
May-12
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Month
6.12 Figure 3 shows the same data but in terms of the value of the construction activity
taking place. This shows that commercial building projects typically represent a
higher build value than do residential projects. This is because the majority of
residential projects involve just one dwelling, whereas commercial projects tend
to be of a larger scale.
15
Figure 3: Anticipated value of building projects
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
Jul-09
Nov-09
Jul-10
Nov-10
Jul-11
Nov-11
Jan-09
May-09
Jan-10
May-10
Jan-11
May-11
Jan-12
May-12
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Month
6.13 The larger project values of commercial projects is important, since the higher
value of these projects means that there are relatively few building contractors on
the Island who are in a position to bid for these contracts. Over the last few years
this has meant that it has been the larger contractors in the Island who have
undertaken this type of work, leaving the residential building projects to the small
to medium sized building contractors.
6.14 If all these projects take place, then building activity on large scale projects
(defined as those over £200,000 in value) will run at a value of between £7m and
£8m a month in 2009 and into 2010.
6.15 However, there are a number of factors that may affect this anticipated demand,
and these are examined in the section analysing the qualitative feedback from
those spoken to during the survey. It is important to consider that these factors
may have an important influence on whether the anticipated projects shown in
Figures 2 and 3 actually materialise. These qualitative factors are examined in the
next section.
16
Qualitative results
6.16 A significant part of the survey process was to gain through a series of informal
interviews, the opinions of key players in the industry, how they felt the industry was
faring, and what difficulties (if any) they anticipated in the coming months. Interviews
were held with a number of distinct industry areas:
• Developers
• Professional services – Architects and Surveyors
• Building Contractors and suppliers
6.17 The following is an analysis of the opinions expressed by those interviewed.
Opinions of Developers
6.18 Developers are the start of the chain in the lifecycle of a construction project. They
provide the initial impetus for a project, generate ideas, and arrange the capital
funding for the project.
6.19 Developers may range in size and scale from large scale businesses with an extensive
property portfolio, to individuals with the ability to fund a small scale development. In
Guernsey both ends of the spectrum are represented. A number of building
contractors also act as developers on a number of sites around the Island.
6.20 Project types for developers may vary from large scale commercial property
development (for example the Admiral Park site) to the development of individual
residential dwellings, to bigger scale social housing projects.
6.21 Project viability is an important consideration for a developer, and at present a
number of concerns face potential developments.
6.22 The developers interviewed in the survey all considered that there were difficult times
ahead. The viability of a number of projects were being affected by:
• The current economic climate; and
• The availability of finance.
Effect of the difficult economic climate
6.23 The current difficult economic climate has meant that a number of projects are being
reassessed for their viability. Whilst not necessarily resulting in the curtailment of the
project, developers indicated that projects may have to change in nature (that is the
mix of commercial to residential, and the type of commercial activity), or be delayed,
until the economic conditions improve.
17
6.24 Developments in certain commercial areas such as retail are likely to be put on hold,
or re‐examined.
6.25 There is a perception that there is still a demand for quality housing in the Island,
although the availability of sites for development is a factor preventing some
developers from taking forward further residential development projects.
Availability of finance
6.26 Developers of large scale projects did not flag up the lack of finance as being a
particular problem for large scale developments. Project viability was more likely to
put a project on hold.
6.27 However, it was apparent that sources of finance were hard to come by, and that if
secured, then the interest rates charged were likely to be considerably over the Bank
of England base rate. This would have a bearing on project viability.
6.28 The opinion was also expressed that mortgage lenders were restricting their lending to
either existing customers, or to those with considerable equity in their property
portfolio. Some banks had closed their mortgage books completely.
6.29 It was felt that the current difficult economic conditions was having an effect on
businesses in the Island, in that they were now more risk‐averse and less likely to
consider investment projects in the current economic climate. Smaller commercial
jobs (such as office refurbishment) were being placed on hold by some companies.
6.30 On the other side of the coin, it was reported that some developers and landlords with
property portfolios were considering that they might be able to get keen prices from
builders for development and refurbishment work.
Opinions of Professional Services – architects and surveyors
6.31 Architects and surveyors are the first to be involved in drawing up plans for projects.
Surveyors may be involved in feasibility studies and establishing budgets for a project.
6.32 Opinions were mixed in the sector, with those whose core work involved residential
projects faring better than those whose usual work area lay in the commercial sector.
Residential builds
6.33 Architects indicated that they were receiving an increased demand for their services
from the residential sector. There were a significant number of projects involving the
development of residential property ranging from £200,000 to £1m in value. A
18
number of these were in the early planning phase, although it was anticipated that
they would go ahead by the summer of 2009.
6.34 However, there was some uncertainty and a degree of caution about the long term
future of the residential sector. Concerns were raised about the availability of credit
for individuals and whether this would have an impact on the number of projects
coming forward in the future.
Commercial Projects
6.35 A reduction in the volume and project value of commercial projects was reported. This
was particularly noticeable for large scale commercial projects, and was affecting
architectural practices with more exposure to the commercial sector.
Planning approvals
6.36 Concern was expressed about the length of time it took for projects to gain planning
approval. Whilst it is necessary and desirable to have planning control of development
on the Island, some architectural practices commented that the situation seemed to
have worsened within the last 18 months, with some reporting that it took over 13
months to progress a residential project through the planning process. For commercial
projects, the process could take even longer.
6.37 There was significant concern that this was resulting in the curtailment of a number of
projects. A number of examples were cited where projects had been cancelled by
clients who were frustrated with long planning delays. One project that had been
cancelled involved a multi‐million pound commercial building project.
6.38 It is not within the scope of this report to examine whether any unnecessary delays in
receiving planning permission arise from processes within the Environment
Department or because of any shortcomings in the applications submitted. In recent
discussions with the Commerce and Employment Department, however, the
Environment Minister confirmed that his Department was fully committed to
expediting the determination of all planning applications and particularly recognised
the necessity to do so on business related applications in current economic
circumstances.
19
Opinions of Building contractors and suppliers of building materials
6.39 Unlike architects, Building contractors only make money when a building project gets
the go ahead. A significant proportion of an architect’s work is to draw up the plans
for a project, for which they will have been remunerated, whether the project goes
ahead or not.
Scheduling of workloads
6.40 Planning and scheduling of building work is a key concern for building contractors,
particularly where large scale projects are concerned. In an ideal world builders will
look to move from one large project to another, so that knowledge of large scale
projects in the pipeline is beneficial to facilitate planning.
Commercial Projects
6.41 Building contractors, particularly large ones, reported a reduction in the number of
large scale commercial projects. It was also noted that a number of large contracts
were coming to an end or had ended during 2008. This lack of commercial projects
was causing serious concern for a number of contractors. It was felt that once work on
existing projects was completed, workload would fall, and that the situation would
become worse in 6 to 12 months time.
Residential Projects
6.42 In the short to medium term, builders reported that there were a number of
residential building projects in the pipeline. Some pessimism was expressed as to how
long this situation would continue, and all were aware of the potential threats of an
economic recession and the “credit crunch”.
Tenders for building projects
6.43 As a result of the numbers of commercial projects drying up, builders reported that
there was now more competition for medium to large scale residential building
projects. The tendering process was now more competitive with more contractors
involved in the process. It was becoming more difficult to win tenders, although
builders reported that they were winning sufficient tenders to keep their business
going at the moment.
6.44 This process had occurred as a result of the larger building companies on the Island
tendering for projects that they would not have tendered for 12 months ago. This is
turn was putting greater pressure on the small to medium sized building contractor.
20
6.45 It was felt that many contractors were already working to tight margins, and that
there was not much scope to reduce tender prices. Materials and labour costs
remained fixed, as did the large overheads incurred by medium to large building
contractors.
Labour
6.46 Building contractors were keen to retain their core local labour force, and so in certain
cases were not making as much use of sub‐contracted labour as in the past. This
means that sub‐contractors traditionally employed by some of the larger building
contractors may be finding it more difficult to find work. This is evidenced by the fact
that a number of builders mentioned an increase in enquiries for jobs from sub‐
contractors.
6.47 In the medium term, building contractors did not indicate that they intended to lay off
their staff in large numbers. However, there is evidence that this process may have
began in a number of areas (the AFM announcement of job cuts is one example).
6.48 Within the scope of this survey, it was not possible to interview a substantial number
of sub‐contractors. However, it is likely that it will be the small / individual sub‐
contractor that will see less work in the coming months.
21
7 Summary and Conclusions
Uncertain times for the Construction Industry
7.1 The quantitative and qualitative analysis of the study indicates that there are
uncertain times ahead for the local industry. Given the current difficult economic
conditions being experienced all over the world, this is not surprising.
7.2 There are a number of specific concerns raised by the industry which will have a
bearing on the future demand for Construction Industry resources in the Island. These
are:
• Reduction in large scale commercial projects
These types of projects have dried up in recent months with a number of large
scale projects coming to an end in 2009 or having ended in 2008. The larger
contractors are keen to win any large scale public sector projects.
• More competition for medium to large scale residential projects
With the number of residential projects holding up, there will be greater
competition for work in this area, especially if larger contractors move into this
area. This will put pressure on small sized builders, and in particular sub‐
contractors
• Economic conditions
The reduction in the number of large scale commercial projects is one sign that
the difficult economic conditions being experienced worldwide are starting to be
felt within the local Construction Industry. Proposals for residential building
projects seem to be holding up well, but an obvious concern exists if these
projects are not translated into building projects. There are significant concerns
amongst the industry that a lack of available credit facilitates will lead to the
curtailment of a number of projects, and that this effect will only become
apparent over the next 6 months or so.
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APPENDIX 1: Dynamics of the Construction Industry
8.1 In the context of a survey assessing the level of demand in the Construction Industry,
it is useful to examine the dynamics of the industry on the Island, and how labour is
employed.
8.2 The major pool of labour within the industry is contained within the 3rd tier of small
general builders and specialist contractors (see Figure 4). Some of these are used by
larger builders to supplement their core labour force. Specialist labour is often used
by sub‐contracting certain parts of the build such as plastering, electrics or plumbers.
8.3 The large builders in the Island typically retain a core workforce of around 50 to 100
staff, but by the use of sub‐contracting can considerably expand the size of the
workforce on a particular building project. Note that within the scope of this report, a
detailed analysis of the use of imported labour has not been undertaken.
Figure 4: Construction Industry Pyramid
Specialists and
Small to medium sub-contractors
contractors provide labour
Less than 50 staff services
Projects under £2m
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Types of “construction project”
8.4 Construction activity can range from simple household repairs and maintenance right
up to large scale multi‐million pound construction schemes. Generally, construction
activity may be sub‐divided into:
• New buildings – houses, offices;
• Major construction projects – e.g. schools, hospitals, energy from waste plant,
airport terminal;
• Infrastructure – roads, communication highways, sewers;
• Repair and refurbishments ‐interior renewal of buildings, painting/decorating;
and
• Civil mechanical and electrical engineering – coastal defences, water pumping
stations, rewiring projects.
8.5 For the purposes of this survey, construction activity has been divided into:
Commercial projects Offices, shops, hotels, restaurants etc, with no
residential element. These projects can include
new builds, as well as re‐designs, renovations
and refurbishments.
Mixed development projects Projects that include a mix of commercial (e.g.
offices) and residential accommodation.
Residential projects Projects related to housing, including large scale
multi‐unit schemes, as well as single residence
renovations and re‐builds.
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Typical Building project cycle
Design – Bid – Build
8.6 The traditional road map for a construction project is shown in Figure 5. This Design –
Bid – Build process typically uses the services of an architect to project manage the
design and build process. The building contractor usually becomes involved when the
project is put out for tender, and depending on the scale of the project may be
employed throughout the project build lifecycle. Other professional services such as
quantity surveyors may become involved in providing budgets for the project and
establishing the feasibility of certain schemes.
8.7 In this process, there is less risk transferred to the building contractor, whose
responsibility lies in building the project to the specifications of the tender. The major
risk with this process thus lies with the owner of the project or project client.
Design and Build
8.8 Design and Build is where the design and construction aspects of a project are
contracted for with a single entity known as the design‐builder or design‐build
contractor. The design‐builder is usually the building contractor, employing the
services of a professional such as an architect or engineer. In this system, there is
more risk for the building contractor.
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Figure 5:
Simplified Design – Bid – Build construction project process
PROJECT PHASE
Clients = Developers,
Ideas, concepts, Pre-project Entrepreneurs
feasibility, viabilty Businesses, Households
States of Guernsey
Project budgets
established Planning and Architect,
Archietct appointed design Quantity Surveyor,
Plans developed and Client
approved
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APPENDIX 2: Acknowledgments and further information
9.1 Grateful thanks is extended to all those who participated in the survey. The list of
those who took part has not been published in order to retain confidentiality.
9.2 Further information about the survey may be obtained by contacting:
Gareth Jones
Senior Policy Officer
Commerce and Employment Department
PO Box 459, Longue Rue
St Martin
Guernsey
GY1 6AF
Telephone 213028
Email: gareth.jones@commerce.gov.gg
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