黑洞社区

What鈥檚 going on in the North-west? More specifically, what鈥檚 going right in the North-west? The latest data from the Office for National Statistics certainly seems to indicate that a corner has been turned in the region, with construction orders in the first quarter of 2013 up 50% on the same period in 2012.

That compares favourably with the national figures: orders across the UK were marginally down (0.2%) in the first quarter of this year compared to the first quarter of 2012. The comparison with other regions in the north of England is also striking: over the same period, the North-east saw a fall in orders of 26% while Yorkshire and the Humber saw a decline of 43%.

It鈥檚 also clear that this isn鈥檛 a one off. Orders in the region were up year-on-year in the last three quarters of 2012. What鈥檚 more, orders in the region have increased quarter-on-quarter for the last five quarters, rising 4% between the last quarter of 2012 and the first quarter of the year.

鈥淥ur profits may be down this year but our turnover is up, and the interesting thing is that it鈥檚 up in the North-west,鈥� says Mike Banton, managing director of Artez, a relatively new construction firm founded by Banton in 2010 after his departure from troubled Manchester-based housing developer Urban Splash. 鈥淎t the start of the year we were working more in London and Birmingham and Yorkshire and believe it or not we鈥檝e now got three or four schemes all within a 25-mile radius of Manchester, which is fantastic for us.鈥�

So, while recent activity hasn鈥檛 yet fed through into output statistics, it is clear that the North-west is ahead of the curve in terms of construction activity. The question, then, is where is the growth coming from?

Our profits may be down this year but our turnover is up and the interesting thing is it鈥檚 up in the north-west

Mike Banton Artez

鈥淚 think that the sleeping giant is waking up,鈥� says Geoffrey Piper, chief executive of regional business group the North West Business Leadership Team. 鈥淚 think we have been underrated in terms of a place to invest in quite a number of sectors for quite a long time. There鈥檚 a renewal of confidence and a can-do attitude that at one time wasn鈥檛 the case.鈥�

More specifically, Piper believes the plans for a super-port on the Mersey, designed to benefit from the widening of the Panama Canal, are starting to have an impact on investment. 鈥淚t opens up massive freight routes with the Far East. The west coast is going to become the optimum route for that kind of trade.鈥�

Looking a little deeper into the statistics it is clear that housing has played a key part in the turnaround. In total, 拢269m of new private housing orders were made in the first three months of the year, compared with just 拢161m in the first quarter of 2012. Public sector housing orders are significantly up too, from 拢63m in Q1 2012 to 拢84m for the same period this year. No surprise then that developers, consultants and contractors are all reporting a pick-up in residential work.

John Tatham, partnerships director at developer Igloo and adviser to the Merseyside-based Chrysalis Fund, says previous government initiatives such as New Buy are starting to bear fruit. 鈥淪ome of the measures that the government has put in place to stimulate housing development are starting to feed through now,鈥� he says. 鈥淲e saw a big pick-up in demand for new residential in the spring.鈥�

Tony O鈥橞rien, associate partner at architect Sheppard Robson, agrees. 鈥淐ertainly we鈥檝e seen a marked difference on housing,鈥� he says. 鈥淐lients are asking us to look at sites, masterplan sites or even dust down previous schemes. In some instances we鈥檝e been asked to look at previous commercial sites to see whether residential would work. Clients are seeing opportunities and I don鈥檛 think that鈥檚 a surprise. None of the values are anywhere near where they were but projects are starting to move forward.鈥�

Public sector non-infrastructure orders are also up significantly, from 拢222m in Q1 2012 to 拢473m this year. According to Damian Waters, regional director for the North-west at business lobby group the Confederation for British Industry, the increase in orders in this area is largely down to a significant increase in schools funding - two rounds of the Priority School 黑洞社区 Programme (PSBP) have been announced recently. 鈥淭here鈥檚 been some investment in things like hospitals and fire stations, but primarily it鈥檚 schools that is driving some of the momentum,鈥� he says.

We鈥檙e funding commercial and industrial development and that鈥檚 still quite difficult. If you haven鈥檛 got a big pre-let it鈥檚 hard to get a scheme off the ground, certainly in the Merseyside area

John Tatham, Chrysalis Fund

That chimes with the recent experience of contractor Willmott Dixon, which was chosen as contractor for the second round of PSBP funding. 鈥淭here鈥檚 a reasonable number of decent sized projects or programmes of work coming out,鈥� says Anthony Dillon, managing director of Willmott Dixon in the North-west. 鈥淲e were fortunate enough to pick up the second batch of the North-west priority schools and there鈥檚 a further North-west batch coming out this year.鈥�

Dillon adds that the North West Construction Hub - a framework agreement set up for public sector clients - is helping Willmott Dixon and its competitors access work. 鈥淚t is a good procurement route - it鈥檚 very quick in terms of clients getting projects to site,鈥� he says. 鈥淎 lot of local authorities are using that at the moment.鈥�

The situation is more mixed when it comes to employment space. Commercial orders were down year-on-year in the first quarter of the year. However, they have varied significantly over the last 18 months, with a high of 拢417m in the third quarter of last year and a low of 拢264m in the last quarter of 2012. Private industrial orders on the other hand have seen year-on-year growth for the last four quarters, although they dipped slightly from 拢96m to 拢89m between the last quarter of 2012 and the first three months of this year.

Here there appear to be sub-regional differences, with commercial activity in particular stronger in Greater Manchester than in Merseyside. Tatham says that while the commercial market remains difficult across the region, there are signs of life in Manchester. 鈥淸Chrysalis is] funding commercial and industrial development and that鈥檚 still quite difficult,鈥� he says. 鈥淚f you haven鈥檛 got a big pre-let it鈥檚 difficult to get a scheme off the ground, certainly in the Merseyside area. Manchester seems to be a better market. There鈥檚 more appetite. Many of the financial institutions are starting to look more favourably at Manchester.鈥�

Others do not make such qualifications. Artez鈥檚 Bantum, for instance, says that while the commercial and industrial work his company is undertaking may not be the most revolutionary of commissions, it is providing a decent income. 鈥淲e鈥檙e doing quite a lot of refurbishment and fit-out work in existing commercial and industrial buildings,鈥� he says. 鈥淐ertainly in the North-west there seems to be quite a lot of activity, be it people reducing the amount of space they鈥檝e got, increasing the amount of space they鈥檝e got, or improving it. It鈥檚 mainly warehouses and a bit of stuff on retail parks: nothing glamorous. We鈥檙e doing things to pay the bills rather than big, award-winning schemes.鈥�

Sheppard Robson鈥檚 O鈥橞rien adds that while it hasn鈥檛 figured in the orders figures yet, there are signs that commercial developers are at least thinking about development. 鈥淥n the commercial office side of things we are certainly being asked to look at sites more,鈥� he says. 鈥淭hey鈥檙e thinking about it in the sense that they want to position themselves more. Things aren鈥檛 moving particularly, but people are starting to think about what sites they might look at or what sites they might dust off and look again at what values they have.鈥�

Of course, none of this means the North-west is out of the woods yet: order levels in the region are still a long way off those seen before the 2008 crash. With total orders of 拢1.4bn in the first quarter of this year, we are still a long, long way from the pre-crash peak of 拢2.45bn recorded in the second quarter of 2007. But the evidence of a growing momentum in the region鈥檚 construction market cannot be ignored. Perhaps soon the north-south divide clich茅 will have to be reassessed and the nation鈥檚 economists will have to come up with a more nuanced description for our regions鈥� relative economic performances.