Construction Sector Update: September 2021

Figures from the ONS and IHS Markit/CIPS show that while the construction sector has continued to grow throughout the summer, the resurgence is being held back by severe supply chain disruption and an increase in prices.

Monthly statistics over the summer period have already suggested that materials supply was creating a bottle-neck in the construction sector, and these latest figures show the problem is now having a serious effect on output.

ONS reports fall

The latest figures from the Office for National Statistics report a fall in growth for construction over the latest period. Construction output fell by 1.6% in volume terms in July 2021, with these latest figures putting construction at below pre-pandemic levels.

Businesses reported that price increases and product shortages due to supply chain issues are the main reasons for the decline. This is now the fourth consecutive decline in monthly construction output.

Infrastructure has been the main driver of growth since the pandemic, and this sector continued to perform well, now returning £649M above its February 2020 levels.

Meanwhile, private housing has shown the biggest falls in work. Again, evidence points to price rises and shortages of materials as the main contributors to the loss.

Alongside the monthly drop in output, the three-monthly figure registered its first fall since February 2021, at -0.6%.

PMI points to supply chain

Slower growth across a number of construction sectors contributed to the slowdown, which was the slowest since February, according to the IHS Markit/CIPS UK Construction PMI® Total Activity Index.

Many companies in construction noted sustained, and severe, supply chain disruption in August, which contributed to an accelerated rise in input prices – one that was the second fastest in the history of the survey.

This month’s Index posted 55.2 in August, down from 58.7 in July, showing that construction has bounced back from lockdown with rises in output in each of the last seven months. However, the rate of increase this month dropped as the widely reported issues with supply of materials and transport began to weigh on overall construction activity.

Businesses noted that while projects that had been delayed due to Brexit and the COVID-19 pandemic were now commencing, supply issues and associated price rises were not helping client confidence.

Price hikes

As projects hit the ground, demand for construction materials continues to stretch supply chains. Reports from both the PMI survey and ONS suggest that ongoing material shortages were being made worse by a lack of transport and freight availability, compounding existing issues related to the supply of materials due to port congestions and demand and supply imbalances.

Materials most affected in price are concrete, fuel, steel, glass and timber.

While there is still strong demand for construction projects, with businesses gaining confidence for the rest of the year, growth is being stymied by the volatile price and supply situation.

Take a look around opportunities in Tracker

To make the most of new opportunities, get in touch with Tracker for your 1:1 consultation.

Our own market reports tell us that contracts are still being published in high numbers and at high values, with plenty of opportunities for SMEs.

Tracker and BiP Solutions are here to help you step into the market with advice on procurement policy, supporting you to find the procurement opportunities most relevant to you.

Why not take a look at the latest local government, central government and education tender opportunities today? You can also find out what your competitors are winning in these areas and understand the shape and size of their frameworks and DPS opportunities, both past and present. Our free trial allows you to do just that with no obligation.

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Autumn 2021 Budget Announced

The Chancellor has set the date for his next budget, when Government spending plans for the next three years will be revealed.

The results of the Spending Review and plans for public spending will be announced on 27October.

The Chancellor will announce the UK Government’s spending priorities for the remainder of this Parliament, with the three-year review setting out central government departments’ resource and capital budgets for 2022-23 to 2024-25 and the devolved administrations’ block grants for the same period.

Funding boost

Together with the additional funding for health and social care announced in early September, core departmental spending will grow in real terms at nearly 4% per year on average over this Parliament. By 2024-25 core departmental spending will be £140 billion more per year in cash terms than at the start of the Parliament.

As part of his announcement, the Chancellor set the envelope for spending over the next three years:

  • Core day-to-day departmental spending will follow the path set out at Spring Budget 2021.
  • In total, day-to-day spending will increase to £440 billion by 2024-25, increasing by nearly £100 billion per year in cash terms over the life of this Parliament.
  • A step-change in capital investment will be delivered, as set out at Budget 2021. This will see an investment of over £600 billion over five years, the highest sustained level of public sector net investment as a proportion of GDP since the late 1970s.

Investment

With ambitious plans for an infrastructure and innovation revolution, investment will see more contracts brought to market. So, this is an ideal time to look at your plans to supply to the public sector.

Make sure you have the right information and help prepare your bids with key information from Tracker.

​The Chancellor of the Exchequer, Rishi Sunak, said: “Since the start of the pandemic, we’ve delivered on an unprecedented scale to protect people’s jobs and livelihoods.

“Despite the worst economic recession in 300 years, we have not only got people back into work through the Plan for Jobs but continued to deliver on the priorities of the British people.

“At the Spending Review later this year, I will set out how we will continue to invest in public services and drive growth while keeping the public finances on a sustainable path.”

Best value

Given the impact COVID-19 has had on the economy, the Chancellor wants to focus on ensuring every pound of taxpayer funding is well spent, to deliver the highest quality services to the public at the best value. Best value has been at the heart of public procurement for many years, and the latest NPPS [link to previous blog] has underpinned this, along with social value and green credentials. Improving and diversifying the supply chain is an important component in improving value as well as bringing innovation to the public sector.

Find out about new contract notices first and prepare your bids with tailored advice from Tracker. Start your free trial >

Regulatory Reform – cutting red tape to make it easier to tender

The second webinar in our series on procurement, discussed how the new reforms to public procurement will make it easier for suppliers to tender for contracts.

Procurement experts Eddie Regan and Phil Kinnell of PASS – the Procurement Advice and Support Service talked with Dawn McTaggart about how the legislation is proposing to help suppliers bring innovation to the public sector marketplace.

Leaving the European Union has allowed the UK Government to look at the current regulations and consider changes that will make public sector procurement more streamlined and efficient, measured against government targets.

These reforms will bring the single greatest change to the procurement regulations in decades. In this session, our experts look at what this will mean for your business and how you can prepare.

Why do you need to know about the public procurement rules?

Government spends some £290 billion on public procurement every year, and this spending will be leveraged to help drive the UK’s economic recovery following the pandemic and lockdown. Procurement has a role to play in achieving government aims such as opening up public contracts to more small businesses and social enterprises, innovating in public service delivery, and meeting the net zero carbon target by 2050.

With government already committed to ensuring 33% by value of its contracts go to SMEs, there is a massive opportunity for those who have never supplied to the public sector to become part of the marketplace.

What’s changing?

While it is important for you to get to grips with these new procurement changes from the outset, many of the changes will be beneficial to the supply market.

  • The proposal to move from four sets of regulations to one consolidated set will certainly make it easier to understand what the rules require, and the removal of up to 350 regulations will help simplify the process.
  • The creation of a single digital platform will make it easier for suppliers to tender for contracts, with just one form to fill in for all public sector work.
  • There will be changes to framework agreements, and buyers will be required to publish pipelines for future work.
  • New principles of public procurement will simplify procedures for suppliers, making contracts more competitive and attractive to suppliers while building in flexibility for buyers.
  • There will be greater transparency in public procurement, giving suppliers the ability to question buyers’ decisions and create stronger bids for future work.

When to expect these changes

Listening to our experts, these changes won’t be seen overnight. Even with the unexpected release of the NPPS [link to last talks blog] in June, any new processes will take time to bed in and become workable. It is expected that the changes will be brought to Parliament during the next session, meaning any changes are unlikely to happen before spring 2022. Development of the Single Digital Platform itself will be a three-stage process, anticipated to take two to three years.

Top Tips

  1. Educate – Read about the proposed changes. With our research indicating that only a small number of suppliers know about the proposed changes, just listening to webinars such as the Tracker Talks series can give you the edge.
  2. Add – Think about your future plans and how you could give your tenders the edge. The NPPS calls for added social value; what can you do to add social, economic or environmental value?
  3. Plan The requirement to publish pipelines will help you plan your tender bids and business growth. By being aware of future commitments, you can develop your business to meet requirements.
  4. Invest – By investing in market insight and your tender applications, you can create a winning formula.

Tracker and BiP Solutions are here to help you step into the market with advice on procurement policy, supporting you to find the procurement opportunities most relevant to you.

Take a look around opportunities in Tracker

Why not take a look at the latest local government, central government and education tender opportunities today? You can also find out what your competitors are winning in these areas and understand the shape and size of their frameworks and DPS opportunities, both past and present. Our free trial allows you to do just that with no obligation.

Take a look at what you could be missing today. Start your free trial >

UK Government is changing its procurement policies: here’s what you need to know

Procurement policy changes have been making headline news since the transition period for leaving the European Union came to a close in December last year.

With the UK having left the EU, the door is open for the Government to implement its own policies and targets through its contract sourcing.

What you need to know

The Government is looking to make substantial changes to UK procurement policy, and is currently considering responses to its Green Paper Consultation.

The consultation was launched in December 2020, with the Government asking UK organisations to comment upon proposed changes which seek to overhaul the processes at the very heart of public procurement.

When will the new policies come into force?

New rules and regulations for procurement are expected to come this year, with the National Procurement Policy Statement already being published.

What is the National Procurement Policy Statement?

June 2021 saw the announcement of a new National Procurement Policy Statement (NPPS). The statement urges all central government organisations, local authorities, NHS Trusts and police departments to consider the potential wider benefits to the community when initiating a project that involves the spending of public money.

The NPPS “sets out the national priorities that all contracting authorities should have regard to in their procurement where it is relevant to the subject matter of the contract and it is proportionate to do so”.

The statement requires all contracting authorities to consider their organisational capability and capacity, with regard to the procurement skills and resources required to deliver value for money.

You can read the National Procurement Policy Statement along with accompanying guidance here.

How can you take advantage of the policy changes?

As the old adage goes: ‘the early bird gets the worm’. When it comes to public sector procurement, it couldn’t be more true. The best advantage a supplier can achieve from the procurement policy updates is to ensure that they tailor their bid to demonstrate compliance with any and all changes that the buyer highlights as important to them.
Engaging early with buyers to enquire how best to respond to bids in light of recent policy changes not only helps establish relationships, but also allows the supplier to help shape the bid. Buyers cannot, by nature, be experts in every type of product or service they procure – as such, specialist suppliers have an opportunity to help buyers ensure their bid requirements match industry standards.

Government procurement spend is currently £290 billion across the UK public sector, with contracts ranging from multimillion-pound deals to much smaller lots suitable for SMEs.

Procurement has a role to play in achieving the Government’s aims, such as opening up public contracts to more small businesses and social enterprises, innovating in public service delivery, and meeting the net zero carbon target by 2050.

Through our own research and data (see our Transforming Public Procurement Response Paper), we can report that there is broad approval of the need for change within the procurement of public sector goods, services and works. However, a number of reservations and complications are envisaged by both buyers and suppliers, making the need for consultation all the greater.

With the Government committed to ensuring 33% by value of its contracts go to SMEs, there is a need for both sides to come together to drive better value and innovation across the sector.

Next steps

The opportunity exists for wider collaboration to ensure public procurement sets the standard for the country’s future needs.

One thing that will be highly important, however, is that clear guidance must follow any changes proposed, to ensure that everyone has a full understanding of what can and cannot be done when applying the new regulations.
Be prepared and keep up to date with guidance as changes can happen, fast.

Tracker is hosting a series of ‘Tracker Talks’ webinars, where we speak to procurement experts to provide you with advice on how to make the most of public sector opportunities – you can catch up with previous webinars and watch at your leisure with our on-demand procurement webinars.

Take a look around opportunities in Tracker

Why not take a look at the latest local government, central government and education tender opportunities today? You can also find out what your competitors are winning in these areas and understand the shape and size of their frameworks and DPS opportunities, both past and present. Our free trial allows you to do just that with no obligation.

Take a look at what you could be missing today. Request a free personalised demo>