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Education

UK Construction Intelligence Report

Overview

Education remains a key sector not only to the UK construction industry, but to the future prosperity of the UK. It is essential to nurture our young people to become an educated and diverse resource to build our future prosperity and competitiveness. Furthermore, our universities continue to be leading institutions with world renowned research and academic leadership. In financial terms construction accounts for approximately 10% ~(c£90bn) of the UK GDP. Education construction spend represents approximately 17% (£12bn) of this with Schools and Colleges representing 65% (£8bn) and Universities 35% (£4bn)

The Department of Education remain the sectors biggest client, which is set to grow further if the recent Augar report is adopted. The report sets out a vision for an increasingly diverse post 16 education landscape with a greater stepped academic attainment through the education levels, Level 3 ‘A’ level / Btec – Level 4 HNC, Level 5 Foundation degree and Level 6 degree. Currently traditional routes of Level 3 attainment through ‘A’ level, is followed with a jump to university to attain a level 6 full degree. Augar is advocating a ‘lifelong’ approach to learning which is increasingly flexible and adaptable to a changing employment horizon. To aid this transition the reports recommends £1bn investment in further education colleges over the next spending review round. An alternative to the traditional ‘A’ level route is also being trialed. The new ‘T’ (Technical) level route is set for trial from September 2020.

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Spending on schools has changed over the last year with increasing proportions of the Department of Education budget going to secondary schools. The sector split overall is approximately Secondary schools 34%, Primary schools 13% and University / Colleges 28%. The remaining 25% being shared between Special Schools, nurseries etc. The trend shift between primary to secondary is expected as it will follow the pupil number ‘bulge’ as that cohort move through the education system.

The overriding economic headline for sector is one of change, which is resulting in the construction sector output reducing / flat lining until 2020 / 2021. A trend started in 2017. That said, given the size and importance of the sector school investment is likely to remain with the Universities and Colleges possible feeling the ‘wind of change’ a little harder due to Brexit and Augar. However, depending on the final acceptance of Augar it could be a split story between FE Colleges and University Institutions.

Schools

  • England

    The Department for Education (DFE) have maintained funding commitments across their key programs (Priority Schools Building Program (PSBP), Free Schools, Academisation, Capital Improvement Funding and devolved formula capital allocations, however with planning harder to achieve and land cost rising, progress in some areas has been challenging. The PSBP2 programme seeks to mitigate these issues as it focuses on expansions rather than new builds, but free school completions, although still a focus, are slower in delivery. The DFE commitment to Free Schools is still high with an additional £320m being allocated for 140 additional free schools in the 2017 Autumn Budget. These additional sites are starting to be allocated to the department’s delivery partners. The level of investment in the school's sector remains high, however there is still a reported c£14bn investment required to bring the existing school stock to a good condition rating from its current condition. The DFE are well advanced with their Schools Building Survey Program and the returned data will support an updated view. However, compare the £14bn estimated investment required to the current c£2bn p/a investment in Condition Improvement and condition allocation, there is still investment to be made over the foreseeable future. The DFE have always shown themselves to be driving improvement and delivering value for money. This continues to be the case with their move to modular / volumetric school designs and they have now moved even further along the Modern Methods of Construction (MMC) initiative with their component school designs. DFE suppliers appointed to the new contractor frameworks will have to embrace these new Modern Methods of Construction to deliver on the departments cost and time expectations, which will be increasingly pressurised. This is important given the need for a projected 420,000 additional places by 2021.

    The Augar report has sent a clear message that a life long learning path should be the aspiration for growing numbers of young people. Stepping through the education ‘Levels’ below a Level 6 full degree. Therefore the Government’s commitment to trialing the Technical (T Level) education curriculum will be a good test for Further Education Colleges chosen to trial the qualification. Around 50 'T Level' providers have been selected to kick off the programme in September 2020. Initial subjects are Construction, Digital and Childcare. Technical colleges have started to review requirements in terms of estate and teaching to accommodate the new requirements. There may therefore be a funding and building requirement for providers to meet the T Level aspirations in coming years. The Augar report has suggested an additional £1bn should be made available to colleges over the next SR period. As public departments draft their budget requirements for the new Spending Review (SR) period, education will remain an important sector for investment, but will likely have to battle harder against health and social care and of course the effects of BREXIT!

  • Wales

    In the last year Wales saw a 1.3% reduction in construction activity in the education sector. 8.2% of all UK construction contracts in the sector were let in Wales, and currently Cardiff University is the UK’s 5th largest education client, with four projects totalling £121m.

    With Welsh Government Education Band A projects now drawn to a close councils are looking towards their Band B projects which are estimated to be in the region of £2.3bn. The Welsh Governments Strategy for 1 million Welsh speakers by 2050 and the new Welsh curriculum (to be rolled out in schools from 2022) is placing additional pressures on local authorities to increase the provision for Welsh language places within schools. This is driving a need for the review of education strategies that need to focus on ensuring an efficient delivery model for both English and additional future Welsh provision which is anticipated to grow significantly.

    The 21st Century Schools programme has become the focus for the Welsh Government’s policy on Project Bank Accounts in an aim to promote best practice to the public sector bodies in Wales. Effective from the 1st of January 2018, but now coming into force as a condition of Band B funding, all contracts fully or partly funded by the Welsh Government with a project value of £2m or more will be required to have a project bank account.

  • Scotland

    Education remains a focus for development in Scotland and will continue to be a cornerstone of the construction industry in the coming years. Investment is being driven throughout the education cycle, starting with the Scottish Futures Trust’s work to support the development of local Early Learning and Childcare expansion plans. Through a mixture of new, refurbished and extended public sector assets, it is estimated that around 140 new facilities will be delivered across Scotland.

    This centrally driven initiative has striking similarities to the ‘Schools for the Future’ programme, which saw the Scottish Government implement a £1.8bn investment over 117 schools throughout the country. During his key note speech at the Education Conference in 2018, where Faithful+Gould were awarded Consultant of the Year, the Deputy First Minister John Swinney looked forward and announced that the Scottish Government will invest a further £1 billion in rebuilding and refurbishing schools. The new funding, which will kick in from 2021 when the Schools for the Future building programme ends, will benefit an estimated 50,000 pupils.

    In Higher Education, an area of significant development in recent years, investment continues across the Universities estate with the significant development programmes in Edinburgh (£1.5bn) and Glasgow (£1bn) under way. The sector is encountering increased competition to attract student places and this is driving a focus on student experience, with health and wellbeing top of the agenda. The shape and content of the university estate is having more and more influence on that student experience and advancements in technology and teaching methods are being used to create exciting opportunities to provide flexible and innovative spaces within the estate.

    However, financial viability is critical in this competitive market. In tandem with increased levels of competition, the publication of the Augar report has created a risk that Scottish universities will lead to lower tuition fees for ‘rest of the UK’ students. The Scottish Government’s decision in 2011 to make undergraduate education free for Scottish and EU-domiciled students was based upon a number of income assumptions, one of which being revenue via students from the rest of the UK. This is estimated to create a funding shortfall of £30m per annum, and it is unlikely that a guaranteed revenue source will be identified to fill that void.

    The focus therefore turns to efficiency, and a drive to develop and manage estates based upon forward looking decisions that consider asset costs from development through to disposal. Data regarding the estate is becoming key, and the use of that data to forecast maintenance budgets is likely to become an increasing part of the decision-making process.

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Talking point

Making Best use of Existing School Sites

The Department for Education are investing significant sums in capital build and alteration programmes. They are a leading edge client in the development of factory and modern methods of construction. However, given rising land costs and competition for city sites, delivery to required timescales is becoming increasingly difficult. To try and combat this the DFE are working closely with their property team, LocatED. LocatED are finding innovative ways to identify land and compile schemes that make developments for schools affordable in major cities. They are also looking in certain instances to redevelop underused land for housing which releases funding for schools and academies to invest in the school. Therefore, schools, academies, MAT’s, diocesan schools etc. have an opportunity to review their site utilisation and look ‘out side the box’ when considering how to raise funds to improve the school estate and curriculum offer and to grow inclusivity.

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Project showcase

SEC - HARROGATE GRAMMAR SCHOOL

Harrogate, North Yorkshire

Faithful+Gould are currently the sole supplier for the delivery of all construction works at the Red Kite Learning Trust.

The trust have 13 schools situated within Harrogate and Leeds areas. Our scope of services on the projects we are currently commissioned to deliver includes provision of Project Management, Quantity Surveying, Building Surveying and Principal Designer Services. Working in our multi-disciplinary role we are also responsible for the procurement and management of the entire design team. Following the successes of our services to date, we are also in the process of assisting Red Kite Learning Trust in the preparation of their full estates plan for capital works due to be completed over the next 5 years.

As part of our ongoing offering to the Trust we explored possible funding streams available to the Trust and decided to progress through the Schools Estates Consultancy Initiative. The Trust commissioned the team to undertake the Phase 1 SEC assessment of there estate. This was undertaken and identified a substantial amount of Section 106 funding available, some of which was already allocated to the Trusts schools. Of particular interest was the amount of Section 106 money available in the Harrogate area where the Trust were in negotiations with North County Council. Through the information we provided to the Trust we were able to assist them in securing £1.28million in contributions from S106 money from North Yorkshire County Council to enable the Harrogate Grammar school scheme to progress.

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The project involves a two storey 3 classroom infill extension with large open student space to the ground floor along with alterations within the existing school to accommodate the extension.

The design for the school is currently progressed to RIBA Stage 3 and will be tendered via a single stage competitive process and will be procured traditionally utilising a JCT Standard Building Contract without quantities. The construction work is due to commence on site January 2020 and complete for the new September term 2020 and has a construction value of £1.38m.

Higher education

Creating a better, more efficient, university estate in the face of significant uncertainty

UK Universities occupy more than 27 million square metres and spend approximately c£3 billion per year on managing and maintaining their estate. With Total Property Costs remaining stable over the last three years despite an increase in footprint of more than half a million square metres, it's clear to see that there is a pressing need to look at the whole picture before committing University resources on capital investment. Backlog maintenance and obsolescence are challenges that will continue to face the sector and whilst the average age of the estate is reducing, more than 30% is nearing the end of its design life. Therefore, with many of the stresses stated below a revised focus on improving rather than straight replacement might be an emerging key strategy for some universities. However, each university will have an approach based around their curriculum offer and what share of the student market they feel they can attract. Currently the student demographic is dipping with a c5% decline in the UK population of 18 year old’s, however, the sector is expecting a 10 per cent growth in student numbers by 2022. With c300,000 additional students expected by 2030, as stated at the recent AUDE conference.

The Aude report proposals set out an increasingly competitive market, and one where student fees are recommended to be cut from their current £9,250 per year down to £7,500. Augar states that university surpluses should be used to help offset the fee revenue deficit. However the picture across the sector is stark breaking into four broad groups, the very top echelon with stated surpluses as a proportion of fee income / revenue of c33%. A band of c 13 universities with surpluses of c10%. A large band of c 60% of Universities lower than 10% (the suggested majority of the band is likely between 3% and 5%) and a band of c 32 approximately 25% of English Universities with a deficit. Therefore, forward budgeting and approach to campus development needs to be carefully planned. Students’ expectations have shifted significantly over the last 5 years, driving much higher expectations in learning environments, teaching standards and employability, all things the Augar report has championed along with the new Office for Students (OFS). Universities are competing to attract and retain the best staff and students so capital investment will continue to be key for institutions to differentiate themselves. Whilst the sector’s capital investment runs at around £3 billion per year, half of that investment comes from just 20 Institutions. Many Universities, particularly those with limited funds, will inevitably need to adapt their facilities to reflect changes in demand, courses, technology and learning environment – future-proofing accommodation and building flexibility in at the start is essential. Driving efficiency, reducing costs, improving service and increasing commercial income from the estate will be vital for the survival of many institutions.

In contrast Further Education Institutions are in a much worse financial state. As reported in sector press, this is partly due to the unintended consequence of a new insolvency regime introduced in January 2019 that brings colleges within the remit of company insolvency law and so cuts their credit score, which has increased the cost of private sector debt. Therefore, capital investment is harder and despite a potential £1bn Government funding investment in colleges, the sector will have to plan carefully to grow opportunities presented within the emerging post Auger landscape.

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Talking point

May 2019 Augar report

The May 2019 Augar report provided an in depth view of the post 18 learning environment. The report did not just focus on post sixteens continuing their academic journey, it looked at the further education and higher education sector as a whole. It states there are 2.2 million full and part time adult further education (FE) students in the sector receiving £2.3 billion of public funding, which shows a disparity of funding when compared to the university sector. The report also highlighted the disparity between the UK and continental Europe where a significant number of students follow a learning path between ‘A’ levels (level 3) to a full degree (level 6). In the UK there are many fewer students following an ONC (level 3), HNC (level 4) and foundation degree (level 5) route. This is potentially holding back the UK’s economic standing, and given the future changing nature of the workplace could become increasingly critical if we want increasingly diverse and changing skill sets. Augar has made a recommendation for an additional £1bn to be made available to further education colleges over the coming public sector budgeting cycle. Therefore, we can possibly expect to see a changing face of the FE sector. A sector that increasingly becomes tuned to industrial and economic requirements, but one that will also need to adapt their own operating models to align with new accounting requirements.

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Project showcase

The Northern School of Art – Further Education College

Middlesbrough

Faithful+Gould have been working with The Northern School of Art on its proposed campus relocation from its existing site on Green Lane in Middlesbrough. Providing cost management services in the pre-contract stage Faithful+Gould are working with the College and project team to help deliver a scheme that’s meets stakeholder requirements while delivering a state of the art new Further Education facility to serve the Tees Valley and surrounding area. The design has to be delivered within the funds available, while delivering a striking new building in the heart of the preferred site in central Middlesbrough. Faithful+Gould are a pro-active member of the project team reviewing various design solutions assessing initial capital and as well as cost in use to arrive at best value solutions.

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As part of the proposed project The Northern School of Art wishes to relocate to a new, purpose built facility in Middlesbrough town centre. The proposed new building will provide circa 5,200m2 of accommodation over 3 floors with associated car parking, servicing and external social space.

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The new college aims to provide Arts teaching spaces for of up to 725 students

The aim of the re-locations is to improve the student experience, align the facilities to curriculum need, reduce operational costs and liabilities, improve access to and visibility of The Northern School of Art and support the regeneration of Middlesbrough.

The proposed development is part of the wider vision for the Tees Valley Combined Authority and Middlesbrough Council in their development plans for Middlesbrough and the Tees Valley the scheme could act as a ‘gateway’ project as part of other nearby planned development.


  • Terry Stocks

    Director - Head of Public Sector and Education - UK & Europe