Steel Costs Rising25.02.2010

Speaking at the National Dinner of the British Constructional Steelwork Association held at the Dorchester Hotel on 25 February, BCSA President Jack Sanderson said:

As we all know the economic fortunes have changed dramatically over the past 18 months and most BCSA members have had to adjust their capacity accordingly. 2010 is likely to be another very difficult year, but hopefully we are now at the bottom of the fall in steel construction demand.

Whilst we should not read too much into government statistics, the latest figures for new construction orders show that new private commercial orders in the three months to December 2009 rose by 18% compared with the previous three month period and new private industrial orders in the three months to December 2009 rose by 24% compared with the previous three month period.
At this low point in the cycle the statistics are likely to be somewhat erratic and the recovery is not expected to start to get underway until 2011. However input costs, such as steel prices, are now already back on the increase.

Looking back over recent events, last year BCSA achieved a significant victory by successfully opposing the end of the opt-out to the Working Time Directive. The petition contributed to by so many Members of the Association was a key influence in this achievement.

Also, after a number of years of lobbying and campaigning by BCSA members and its SEC Group colleagues, amendments to the Construction Act became a reality last November as Part 8 of the Local Democracy, Economic Development and Construction Act. Although we did not get everything it hoped for, the revised legislation will bring improvements in payment to Members.

There will be a delay before the amendments come into force, to allow the Scheme for Construction Contracts to be updated and we will use this time to provide training for Members in how to get the best out of the updated Act.

Over the years, a great deal of resource has been dedicated to improving payment terms: one example of this is of course the Construction Act and now the amendments to it. The government's Office of Government Commerce (OGC) is determined to require the use of fair payment practices throughout the supply chain by making fair payment a contractual obligation in all public sector contracts.

Credit insurance remains a difficult area although it is still available to some extent. Government initiatives have done little to help. The Association remains in discussions with insurers with a view to reviving an insolvency protection scheme.

In April 2008 the government cancelled relief from business rates on empty non-domestic buildings - the government's argument is that it will force rents down. This argument is flawed and in fact, it has led to perfectly good, empty buildings being demolished and caused immense difficulties. BCSA is in discussion with Conservative Shadow Ministers on this and a number of other key issues.

As an industry we place the health and safety of our people at the top of our agenda and BCSA has been actively involved with the Health & Safety Executive to address safety issues and best practice, for example a crane safety alert has been issued by the HSE with the BCSA logo and improved information on MEWPs will be issued soon.

Members have made a lot of effort to drive accidents and injuries down and I am pleased to report that accident data for 2009 shows the industry has met the target set by the construction industry and reduced reportable accidents by 66% in a ten year period.

Over the years, the proliferation of health and safety pre-qualification questionnaires has placed increasing burdens on companies to pre-qualify repeatedly for both public and private sector work. The Association's membership assessment process has been audited by Safety Schemes in Procurement (SSiP), a Forum approved by government and the Health and Safety Executive as complying with the core criteria for health and safety competence in the Approved Code of Practice (ACoP) to the Construction (Design and Management) Regulations 2007. SSiP members mutually recognise each other’s schemes, thus cutting down on burdensome paperwork for Members.

Sustainability continues to be a high government priority from global initiatives such as the Copenhagen accord to national schemes that limit the carbon emissions for both domestic and non-domestic buildings. Hence today I am pleased to announce the launch the ‘Target Zero’ Design Guide for Schools.

In 2008 BCSA and Corus commissioned a project team led by AECOM to carry out a £1m sustainability project with the aim of making steel intensive zero carbon buildings a reality.

This ‘Target Zero’ project study will generate fully costed solutions to meet each of the Government’s energy reduction targets through to zero carbon by 2019 and will provide these solutions several years in advance. Our project is looking at five building types (schools, warehouses, offices, supermarkets and mixed use).

The aim is to provide designers with guidelines to eliminate the estimated 100 million tonnes of CO2 produced by non – domestic buildings in the UK each year; this is 18% of the UK’s total CO2 emissions and more than twenty gas power stations produce in the same period.

Last year BCSA launched its Carbon Footprint Tool for members - this has proved a great success and has been adopted by the majority of members. Building on this success BCSA and Corus have commissioned Atkins to develop a Carbon footprint tool for composite bridges which will estimate the ‘Construction’ and ‘Maintenance’ energy of a steel composite bridge based on preliminary design quantities.

We believe that clients, architects and designers should consider steel as the material of choice for zero carbon structures. Ninety-nine per cent of steel is either recycled or reused - a far greater amount than wood or concrete making it the sustainable structural building material.

Turning to other design issues, next month the British Standards Institution (BSI) will withdraw all British Standards that conflict with the Eurocodes. We have been lobbying government to retain the use of British Standards until such time that the necessary education and training has been completed for the introduction of Eurocodes.

Hence I am pleased that the Department for Communities and Local Government (DCLG) has postponed the amendment to Approved Document A – Structure until 2013. This means that our national design standards will continue to be listed as acceptable methods of complying with the Building Regulations. Furthermore the BSI committee responsible for BS 5950 has confirmed the continued use of BS 5950 until 2015. Therefore designers and engineers may continue to use BS 5950 for the foreseeable future.

CE marking of structural steelwork is coming this year and BCSA is publishing a CE Marking version of the National Structural Steelwork Specification.

BCSA and the Steel Construction Certification Scheme have also developed guidance and courses for member companies on what they need to do in terms of changes to their factory production control procedures and welding quality management plans. Regular courses are now being held for BCSA members on the Role of the Responsible Welding Co-ordinator.

Factory Production Control systems must be certified by a Notified Body and the Steel Construction Certification Scheme has applied to the Department for Communities and Local Government to become a Notified Body. I am pleased to announce that SCCS has received confirmation from UKAS recognising that it has the necessary knowledge and competence to certify Factory Production Control systems for CE Marking.

I would like to take this opportunity to thank the Chairman and Board members of the Certification Scheme for their major contribution towards the continual improvement of the industry.

Looking forward we are exploring new market opportunities for members and next month we will be holding a seminar jointly with the Department for Business, Industry and Skills and with the Department of Energy and Climate Change on the new nuclear and renewable power generation programme. In April we will be holding a Bridge Conference in association with the Highways Agency.

Also, in order to enhance quality, performance and reliability, BCSA works closely with the Highways Agency on the development and implementation of Sector Schemes for bridges, such as the schemes for corrosion protection and the fabrication of structural steelwork

Our sector’s flagship promotion event is the Structural Steel Design Award and last year we held the event at the Science Museum. I thank the Design Awards judges, past and present, for their tireless work in identifying the best examples of steel design and construction.

In her speech, Michelle McDowell, Chair of the Assocaition for Consultancy and Engineering said:

It is my real pleasure to be here with you this evening.
I was delighted to be invited to speak to you as the new chair of the Association for Consultancy and Engineering, the ACE.

At heart, I am a structural engineer.
My first steel project was a factory in Germany made from British Steel.
It was an ambitious structure, suspended by steel hangers from 30m high steel pylons.
As well as designing the structure, I was involved with the fabrication of the steelwork, its transport to site and the construction of the frame.
Through this project, I began to understand what was achievable with steel and this has inspired me and my design approach over my 25 year career.

What a year, you might say, to become a spokesperson for the ACE – the organisation which represents the business interests of the consultancy and engineering industry in the UK. The last eighteen months have been a real challenge for our sector, not least the steel industry.
This year will continue to be difficult but slowly things will change, and change for the better. I think we are already seeing that.
• The UK economy has emerged, if only by the skin of our teeth, from a deep recession.
• Around the world, some economic indicators are pointing tentatively in the right direction.

There are of course problems ahead.
• The economy could turn down again. After all there has only been a small return to growth.
• The public deficit is going to have to be addressed at some stage, whether that starts this year or next.
• Global confidence will take time to recover from the severe lows of the last year.

But members of the ACE aren’t completely downcast.
The Building Schools for the Future and City Academy programmes are well underway.
I’m lucky to have been heavily involved in school building projects in recent years.
A well-designed and well-built school, or a well-renovated one, has a positive impact on its community. These are great projects for our sector.
From an industry point of view, they provide excellent opportunities to keep talented people in construction during the economic downturn.
Very importantly, they strengthen public awareness that modern Britain continues to have a varied economy and was never completely reliant on one sector.
After all, it is easy to forget sometimes that the UK is still the sixth largest manufacturing nation in the world.

The biggest reason ACE members are not as downcast as some are, is our belief that the economy will return to growth.
This will not be easy and there are many challenges that have to be faced.

Part of this growth will come from the move to a low carbon economy.
I believe engineers, and all those involved in the manufacturing and industrial sector, are the people who have the answers to this challenge.

Why, given the lack of agreement at Copenhagen and the state of government finances do I sound optimistic?
If someone woke up today after ten years of sleep, the biggest changes they would see, apart from iPhones and the fact that a duck house could be claimed as a second home, would come down to how we are tackling the problems of
• managing waste
• ensuring a secure energy supply and
• dealing with the challenges of carbon reduction.
It is hard to think back to a time when climate change wasn’t a part of everyday language.
It is even harder to imagine a debate over energy without talk of carbon emissions and renewables.
Yet, only ten years ago things were less clear cut.
Recycling was an activity for enthusiasts.
It is now standard practice in our homes, offices and factories.

But it isn’t just the issue of recycling that is part of the public policy conversation.
• Energy networks need upgrading.
• Rail networks need upgrading.
• Water and sewerage networks need long-term investment.
• Homes, offices and factories need retrofitting or rebuilding.
The politicians and the public know it.
This means that the infrastructure of Britain needs to change.
And that change will create work for our industry.

The BCSA’s work to develop new low and zero-carbon steel intensive buildings is a fantastic step in the right direction. I, and many of my colleagues, welcome BSCA’s launch today of the Target Zero Design guide for Schools.
Driving down the carbon cost of steel is now a great way to boost steel use as a building material.
Indeed steel already has one big advantage in that it is already recycled or re-used.

So what does all this mean in practice?
It means the Government - at a time of economic hardship - are announcing plans to invest in rail electrification.
It means the Government – at a time of rising budget deficits – are committing to upgrades in the energy grid to accommodate low-carbon power.
And it means we are in a strong position to tell our story to policymakers and for them to listen.

ACE has good links with politicians, business and key public sector figures.
I am very proud of our fantastic membership with their strong portfolios of work that helps us to show the worth of our sector and demonstrate the tangible results of our efforts.
The BCSA is in a similar position.
This is the story we should be telling.

Take rail electrification.
Changing from diesel trains to electric trains can cut carbon emissions by thirty percent.
They can also provide faster connections and greater capacity.
That in turn can result in greater economic growth.
The government is listening - we are set to benefit from new rail upgrades between London and Swansea and Liverpool and Manchester

The same is true of energy production.
We have made the case for greater energy investment for years.
This country has needed to address its ageing infrastructure capacity for a long time.
Now it is starting to do so.
This year already we have had the Crown Estate announce contracts to develop vast offshore wind farms that are billed as the future of the UK’s energy industry.
Investments in energy will run into billions of pounds and will provide a huge proportion of future energy needs – and much needed work for the steel industry.

Of course, having mentioned the economy I can hardly fail to address it properly here. 2009 saw the economy shrink dramatically.
It is worth stressing that the outlook is not one of more of the same.
Public sector spending is likely to be cut in the next couple of years whichever party wins the next election.
In the past that meant quick savings by halting investment in infrastructure.
So it is heartening to see Labour, the Conservatives and the Liberal Democrats all back plans for a new high-speed railway heading north from London.
It is good news that the Greater London Authority, the Mayor’s Office, and all three main parties have backed Crossrail.

The question is where will the financing come from?
We are likely to see a drive to generate private investment and in London Crossrail will be part-funded by taxing those in areas that most benefit from its impact on land values.
Of course, with banks still reluctant to lend this may yet prove more of a trickle than a flood.
ACE has been thinking hard about this and has recently argued that the proposal for a national infrastructure bank should be part of the policy menu to be considered by government as one way of tackling the lack of strategic funding.

We have also argued that the UK conduct an audit of our infrastructure so that the government can begin to prioritise the country’s needs.
We believe that Infrastructure UK could play a vital role here.
Whether it continues in its present form or not, we would hope that a future government will take on board the objectives of such an organisation: long-term strategic planning.

ACE has also welcomed the appointment of Paul Morrell as the UK’s first chief construction adviser.
Paul has been given an excellent opportunity to establish the importance of construction at the heart of Whitehall.
We and others like us are keen to help seize on that opportunity.
As a recent UK Contractors Group report said every pound spent on infrastructure in the UK results in over two pounds of economic activity.
That is the value of our industry and the case for long-term stable investment.
Investment in other sectors simply does not generate that economic reward.

What we most need to do is turn short-term political interest in infrastructure and immediate financial concerns into a case for long-term changes.
We know that following the banking collapse there has been a lot of talk about getting back to a more balanced economy.
And we know that politicians recognise again how vital engineering, infrastructure and manufacturing are.
We need to make them understand what that means.

It is one thing for a politician to say again and again that manufacturing is important.
It is quite another for a politician to know how manufacturing works and how best to promote its success.

It is one thing for politicians to know that engineers are important to the UK’s prosperity.
It is quite another for politicians to know what engineers actually do and the problems they face.

The ACE is working with politicians who understand our sector and who can explain it to those that don’t.

We feel that we, and by we I mean the whole of the construction sector, are making a real impact.

We know the coming year will still be tough.
We know that a new boom time for construction work is not right around the corner.
We do believe this year will be a little better than last.

For all those reasons, I am looking forward to the year ahead.