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London's growing pains
Supply Management – 18 March 2004

The British government's plans to redevelop a massive parcel of land to the east of London will stretch the purchasing activities and capacity of many industries, as Mark Smulian reports

It is Europe's largest development opportunity: nearly 40 miles long, up to 10 miles wide, with 7,400 acres of derelict land. The Thames Gateway area, to the east of London, is the government's chosen site for 120,000 new homes by 2016, not to mention the businesses, schools, hospitals and transport needed to support them.

The area has already had 1 billion of public money earmarked for transport improvements, land remediation work to reclaim polluted or contaminated land and provision of infrastructure to create a series of new towns, as well as extensions to existing ones.

Eventually the government wants the area to soak up the bulk of the pressure for growth in south-east England - and do so by creating new communities where people live and work, rather than turning it into simply a giant dormitory suburb for London.

There are two development hubs, at Stratford and Ebbsfleet, both around new stations on the high-speed Channel Tunnel rail link, and a dozen or so relatively smaller sites. The statistics are mind-boggling, but someone has to build all this, and the materials have to be sourced and delivered. Planning for both is at an early stage.

However, construction skills shortages have plagued the south east for 20 years, and the people who build the Thames Gateway will add to both the region's normal workforce and the extra people demanded by major projects such as Heathrow's Terminal 5.

In terms of materials, the construction industry anticipates not so much absolute shortages - although they may happen - as delivery problems in an area where wharfage will be at a premium, roads tend to peter into suburban high streets and overburdened railways are filled with commuter trains.

There is also the possibility of an unsuspected surge in demand when development becomes self-generating. For example, when London's Docklands development began in the early 1980s, no one then knew that a developer would create something the size of Canary Wharf.

The Gateway extends east roughly from the boundary of the Isle of Dogs and Greenwich to Southend on the Essex side, and Thanet, in Kent. For decades, much of this area was reliant on industries that have either declined or vanished: docks, quarrying, oil refining and cement-making among them. There are, by south-east standards, pockets of high unemployment.

These industries have left behind a vast area of development opportunities that are highly tempting because of their proximity to London, but most of which suffer from some combination of access, contamination or ownership problems that inhibit their use.

The government has set up two urban-development corporations, in Thurrock, Essex, and in east London, to try to cut through the worst of these problems. These quangos have special compulsory purchase-order and planning powers to assemble viable sites for development and provide transport and utility links. Political will and public money are both evident, but can the development be delivered?

Ian Cox is a director of Bellway Homes, one of the most active housebuilders in the Gateway. He says: "We are at the sharp end of the skills problem. There is a shortage of skilled labour generally, and not just in craft trades but in technical skills too." Bellway tries to protect itself through long-term partnering arrangements with its subcontractors, and "therefore we get good service", says Cox. However, the subcontractors have to find the skilled labour from somewhere, and this effectively passes the problem on.

"If output in the Thames Gateway increases as it is planned to, the labour shortage will become more acute," says Cox. Bellway is multi-skilling its employees so they are trained as, say, plasterers, but also perhaps in carpentry and bricklaying.

"The workers would be very employable. As it is, one can have a site almost complete and then be delayed waiting for one trade to be available," he says.

He also expects many "weekly workers", who go back to other parts of the country at weekends, and labour from eastern Europe, once their countries have joined the European Union. The latter, Cox adds, tend to have good skills but need training in UK health and safety standards.

Government pressure

Another option shades into materials procurement. The construction industry has been under government pressure to become more efficient by making greater use of prefabricated components. These enable work to be done in factories then assembled on site by people who would not need the lengthy training required by construction trades. Using these methods is often a condition when public money is given to support housebuilding.

However, manufacturers will not invest unless they are sure they can sell their output, and builders will not rely on it unless they are sure of their supplies. Cox says: "We are trying to increase the amount of offsite construction used.

"We use a lot of timber frames and form long-term relationships with suppliers. For example, Bellway has underwritten one-third of the output for a new factory built in Witney, Oxfordshire, by the Stewart Milne Group, but obviously the suppliers will invest only if they know there is a long-term market."

The materials sector most alive to the Gateway's demand is the aggregates industry, whose products are first into construction projects as they are used in site preparation and foundations. Public opposition to the environmental effects of quarrying has forced the industry to look increasingly to the sea bed, but even its North Sea sources are becoming exhausted.

Andrew Bellamy, resources manager of United Marine Dredging, says the demand from the Thames Gateway is part of the argument being deployed by the industry for new dredging licences in the eastern English Channel.

"We have to plan to have resources beyond the immediate future, and that has to be several years ahead because of the long lead times in consultation and planning processes," he explains.

Most marine aggregates can be taken into the Gateway by river and then only make relatively short journeys to sites by road. The logistics are still affected by factors ranging from the tide to public hostility.

Jerry McLoughlin, chief economist at the Quarry Products Association, says: "There is concern about wharf capacity where there is competition for development sites. If someone puts up luxury flats on the riverside, the residents don't usually want an aggregates wharf outside."

As far as the rest of the materials industry is concerned, it is too early to know whether the Gateway will generate supply constraints. Alan Wilen, economics director of the Construction Products Association, says: "The government's investment has to be front-end loaded to ensure the infrastructure is there so that materials can be delivered to sites."

He says products tend to "travel" further than ever, whether within the UK or as imports, and that timely delivery may be more of an issue than availability.

The south-east's designated growth areas, of which the Gateway is the largest, should add about 10 per cent to demand for construction products in the next decade or so, Wilen believes. "There could be capacity constraints, but I think we should be able to accommodate it."

Whether enough labour and materials will be found to make a reality of the Thames Gateway, only time will tell. There is, after all, an awful lot of it to build on.

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