< Previous20 Business Link www.blmforum.net CONSTRUCTION between price and volume levels. The existing issue has been exacerbated as a direct result of the conflict in Ukraine. Mr Newcomb warned that the ongoing nature of the war means that pressure on the supply chain could continue for some time. Combined with inflation on energy and labour costs, this issue could remain for the rest of 2022. The situation is so complex, that experts cannot accurately give 2022 comparisons because supplier costs increase every time surveys are administered. Suppliers cannot guarantee a hold on product costs, or the actual availability of the materials. All this means that pre-tax profit margins could be halved. Builders must be able to demonstrate a large enough profit margin to meet funding criteria for their projects, meaning that the costs must be passed on to the customer for projects to commence. Ultimately, the consumers (both buyers and sellers) are being disadvantaged, as house prices are increasingly unpredictable. In the last 12 months, prices for new build homes have increased by more than 10 percent. In April 2022, the average cost of a new build house in Northeast Lincolnshire was £232, 457. This figure is an inflation of 14 percent from April 2020, when the same homes would have cost £204, 135. Perhaps unsurprisingly, first time buyers are the most affected by this, especially as a group to whom new builds have a particular appeal. A secondary inflation-related issue is that of recruitment. Over the past 12 months, the average number of vacancies in construction for each over- lapping quarter is 38,000. Construction is a UK industry that hugely benefitted from being part of the EU, as it grew to rely on EU nationals as a large part of the workforce. In the wake of Brexit, construction more than most industries is experiencing an employee deficit. These employee shortages are particularly noticeable across our region, as a region with typically higher than average numbers of migrant workers. This means that there is more competition for the remaining workers, which has led to wage inflation across the sector, alongside the necessary inflation to counteract the cost-of-living crisis. Ultimately, this will increase the budget of any project, and will once again have to be passed onto the consumer. This once again increases the risk that some will be priced out of the market. Iain Parker, partner at Alinea Consulting, says that the solution is bringing in more people from the bottom. This could include increased numbers of apprenticeships available to school leavers, and those looking for a career change. Although this projects a rather gloomy outlook, work is being done to mitigate the effects of inflation on the industry. The Construction Leadership Council (CLC) have drawn up a five-point plan of 18-21.qxp_Layout 1 06/06/2022 14:49 Page 3www.blmforum.net Business Link 21 CONSTRUCTION North Lincs Engineering Ltd We specialise in the Supply, Installation and Reconditioning of Industrial and Marine Diesel Engines and Generating Sets. Our team of Service Engineers can Repair, Maintain or Commission Land based or Marine Installations Worldwide. Tel: 01507 328787 • Email: mark@northlincseng.co.uk • Website: www.northlincseng.co.uk action. The key aim of the plan is to resolve the availability and cost issues, whilst considering the current global position. The plan includes: Developing market intelligence about risk hotspots; Publishing guidance on price inflation indexation and commercial issues; Preparing case studies on good practice in response to current inflation; Running industry briefings on conflict avoidance; and Researching long-term capacity loss from Ukraine, Russia and Belarus, and the impact on the sector. The CLC added that the plan also represents ambitions to steer a coordinated, industry-wide collaboration to reduce the impact of inflation. The five-point plan represents good practice ideologies for the future. Eddie Taaffe, programme co-ordinator of the Housing Delivery and Co-ordination Office, told the committee there is an opportunity to reduce costs by using more modern methods of construction and greater off- site fabrication. Mr Taaffe stressed that no one actor can resolve this issue, and that client, contractors, and all in the supply chain must collaborate to tackle inflation. Across our region, this could mean fostering greater dialogue between the construction giants such as Lindum and Gelder, and smaller building companies. Whilst we greatly benefit in many ways from a global economy, this means that we will be just as negatively affected by global events. The bad news is that material inflation may remain, and even increase for some time, compounded by supply chain issues. On a more positive note, it is in the interests of the entire industry to tackle the issue. This means that concerted efforts are being made to curb inflation and provides hope that the situation could improve by the last quarter of 2022. © stock.adobe.com/Rapeepat 18-21.qxp_Layout 1 06/06/2022 14:49 Page 422 Business Link www.blmforum.net INSURANCE Understanding insurance Insurance has become more complicated since COVID-19 and understanding the various factors and pitfalls behind it can make a world of difference. 22-25.qxp_Layout 1 06/06/2022 14:51 Page 1www.blmforum.net Business Link 23 INSURANCE U nderstanding business insurance can often be a minefield, filled with confusing jargon and nonsensical package offers. The COVID-19 outbreak added an extra layer of confusion when policy holders scrambled to determine what (if any) cover their insurer provided for pandemic-related losses. In fact, survey data suggests that the pandemic has dramatically influenced buyer demands for greater coverage options, with increased flexibility for shifting policy requirements. This has led the government to propose a regulatory overhaul of the insurance sector, with a view to more tailored and timely investigations, and increased investment for revamping existing infrastructure. We shall first seek to understand the proposed changes to the industry, and then what this means for business owners in our area. As the UK moves into a post-Brexit space, the government is seeking to unlock tens of billions of pounds of investment into the insurance sector by reforming the industry via slashing red tape, as it was announced in February this year. Since 2016, the sector has been under the Solvency II rules, designed to harmonise EU insurance regulation. Many within the sector consider the Solvency II initiative to be overly bureaucratic and burdensome. John Glen, Economic Secretary to the Treasury, said the proposed overhaul would allow the 24 Á © stock.adobe.com/Vitalii Vodolazskyi 22-25.qxp_Layout 1 06/06/2022 14:51 Page 224 Business Link www.blmforum.net INSURANCE sector to be more agile and easily adaptable. He said the new, UK-focused regime will facilitate rather than hinder market advancements, support the entry of new and innovative firms and expediate investment by more easily releasing capital. Safeguarding policy holders will remain the core priority. Developed in collaboration with the Prudential Regulation Authority (PRA), the reforms are said to substantially reduce the risk margin, including a reduction of approximately 60 – 70% for long-term insurers. The PRA already has extensive powers to address risks to firms. With the removal of certain regulatory restrictions, the PRA would have greater flexibility to tailor case management to individual firms, thus providing some additional protection against firm failure. The proposed Solvency II reforms include: More sensitive treatment of credit risk in the matching adjustment. A significant increase in flexibility to allow insurers to invest in long-term assets such as infrastructure. A meaningful reduction in the current reporting and administrative burden on firms. Put simply, these proposed changes will mean that insurance firms will be able to provide more individualised services, by having less administrative requirements and being able to invest more easily. Therefore, there is less need to pass on certain costs to the consumer, and insure their own security via tight and confusing policies. So, now that the proposed changes are clearer, where does that leave business owners when deciding on insurance packages? As an employer, employers’ liability insurance is currently a legal requirement. This is not due to change under the proposed regulatory overhaul. This will cover the costs incurred by work related injuries or illnesses. It will cover not only employee compensation, but also any relevant legal fees. If a business uses motor vehicles for travel or delivery, business motor insurance is also required. At minimum, ‘third party only’ cover is required, which covers damage and injury to third party vehicles and drivers. If employees will be driving company vehicles, then it is also a legal requirement to cover them. As with any insurance cover, the cost is dependent upon the type of business, number of employees and claim history. Doing research and shopping around to get the best cover for your business is the best way to understand the available deals which are appropriate for your business. This should not be based solely on cost, as cheaper deals may not cover for certain events, which could be more costly if they came to pass. It is generally more important to ensure you have the correct amount and type of insurance for your business, as different business have different risk profiles. There are other types of insurance that should be considered. If you’re running a small or medium-sized business, you may benefit from public liability insurance. This covers compensation to members of the public for any negligence related injury, death or damage. Similarly, product liability insurance covers against any product fault, and professional indemnity insurance protects against compensation to clients for losses incurred by professional advice given. If your business owns any property, or has stock and equipment stored in rented property, it is highly recommended that these are insured against unexpected damage. This could cause the business to temporarily cease operation, and insurance could cinch the business’s survival. This would generally be considered business interruption insurance, and is often sold as an additional extra, but could be well worth the additional pounds. Even if you have moved away from tangible assets, cyber assets could still be at risk. Cyber insurance provides cover against malicious cyber security breaches (such as viruses) and non- malicious incidents (such as accidental GDPR breaches). Cyber insurance can provide cover for business interruption 22-25.qxp_Layout 1 06/06/2022 14:51 Page 3www.blmforum.net Business Link 25 INSURANCE caused by these events, in addition to cyber extortion, damage to digital property, media liability and some third- party costs. Many cyber insurance policies offer services to help you assess current cyber risks and how to protect your business from these. As all these policies show, it is important to understand specific business risk profiles when considering policy packages. It also becomes clear why the government is pushing for greater flexibility over regulation. It would allow for policy holders to demand openness and flexibility from providers, whilst taking comfort that their protection is being safeguarded. Similarly, providers could take advantage of a growing competitive market, without being able to exploit consumer concern over instability. As with many things, the cheapest policy may not always be the best. Yet, be wary of premiums on insurance packages rather than individual policies. Shop around to ensure the best cover for the price. There are comparison sites which help you determine the best combination within your budget and business needs. Whilst nobody can predict the future, the last few years have demonstrated that it is best to be as prepared as possible. © stock.adobe.com/thodonal 22-25.qxp_Layout 1 06/06/2022 14:51 Page 426 Business Link www.blmforum.net PORTS AND LOGISTICS Though the strength of Yorkshire and Lincolnshire’s ports and logistics industry are well known, the counties are showing no signs of complacency, with investment rife and new developments underway. A ports and logistics powerhouse, Yorkshire and Lincolnshire are home to constantly developing ports, solid road, rail, and air connections as well as logistics property that is close to key motorways and in high demand. The power of ports Some of the country’s busiest major ports are located in Grimsby, Goole, Hull, and Immingham, with £75bn of trade passing through these ports each year. The first of these is one of the UK’s leading automotive ports and a hub for the offshore wind industry. It additionally handles a range of other cargo, whilst holding strong connections to the fishing and food industries. An inland port, the Port of Goole handles around 1.5m tonnes of cargo per year, while the Port of Hull is the UK’s leading softwood timber port and a focus area for the offshore wind sector on the Humber. It hosts the Hull Container Terminal and the Humber International Enterprise Park, 26-31.qxp_Layout 1 06/06/2022 14:53 Page 1www.blmforum.net Business Link 27 PORTS AND LOGISTICS one of the biggest development sites in the UK. Finally the Port of Immingham is the UK’s largest port by tonnage, handling around 46m tonnes of cargo every year. Though these ports are long established, they continue to evolve and be future proofed. Equipment investments are being made alongside applications and approvals for new development at the ports. For example Stena Line and Associated British Ports (ABP) signed a £100m deal for a new ferry terminal at the Port of Immingham at the start of the year, and at the Port of Hull, ABP was recently granted outline planning consent for more than 4.25m sq ft of industrial, manufacturing and logistics development by East Riding of Yorkshire Council. Simon Bird, regional director for the Humber at ABP, said: “This is one of the premier development sites in the North of England. It’s an exciting opportunity and great to have planning permission so that HIEP (Humber International Enterprise Park) can now get up and running. The site offers huge potential to support business growth. Port-centric manufacturers and distributors would have easy access to import and export commodities while benefiting from the Humber Freeport status.” Developments such as this are being boosted by the Humber successfully gaining Freeport status which will bring investors to the immense amount of 28 Á 26-31.qxp_Layout 1 06/06/2022 14:54 Page 228 Business Link www.blmforum.net PORTS AND LOGISTICS developable land available. The Humber has three Freeport Tax Assisted Zones, which present significant tax incentives for inward investors seeking land for new facilities. Already within the Humber Freeport Tax Assisted Zone areas there is land set aside for a new offshore wind facility. In Goole, inside the Tax Zone, there is land that will be focused on new manufacturing and supply to support the new Siemens Rail factory currently being built. Furthermore within the Hull East Tax Zone, there are a number of different land parcels. Siemens Gamesa have land to support the expansion of their existing offshore wind factory, the Saltend Chemicals Park sits inside the Zone, and their Freeport land has drawn investment from Pensana PLC for a new Rare Earth Metal processing facility that will supply the electric vehicle (EV) and wind turbine markets. The Tax Zone further houses the Yorkshire Energy Park, with 88 acres of developable space, and the aforementioned Humber International Enterprise Park also has 212 acres of its land in the Hull East Tax Assisted Zone, adjacent to the Port of Hull. Additional strides forward are being made to improve the sustainability of the ports, with the two largest roof-mounted solar power facilities in the UK in the ports of Immingham and Hull, and a major installation of EV charging points is underway, while efficient and low- emission equipment is being selected. Logistics property booms As space develops by the ports, so does logistics property across our counties - with high take-up. In its recently released UK Logistics Market Summary for Q1 2022, global real estate advisor CBRE pinpointed that despite experiencing a quieter quarter in terms of logistics take-up in Yorkshire and the North East, a strong pipeline of deals is anticipated with the second largest amount of space under offer compared to other UK regions. The region concluded the quarter at 5.8m sq ft with three build-to-suit units over 1m sq ft. While Yorkshire & North East have the lowest vacancy rate in the UK at just 0.94%, the region has increased 26-31.qxp_Layout 1 06/06/2022 14:54 Page 3www.blmforum.net Business Link 29 PORTS AND LOGISTICS © stock.adobe.com/harlequin9 Tel: 01482 325676 • Email: sales@kingston-engineering.co.uk • www.kingston-engineering.co.uk Kingston Engineering are specialists in precision engineering, based in Hull. As one of the region’s leading companies in their sector, Kingston Engineering can provide specialised power screw products, specialist leadscrew and ex-stock power nuts and screws. In addition, they can provide expertise and guidance in factory and production machinery installation, commissioning, maintenance and repair. QoQ from 0.55% with availability increasing by 52% QoQ reaching 2.3m sq ft. Take-up is predominantly made up of speculative under construction spaces. The region has also experienced rental growth in Q1, climbing to £7.75psf, a 24% YoY rise. Prime yields within the region hardened 10bps to 3.65%. Mike Baugh, senior director for CBRE Leeds, said: “The supply forecast is positive with circa 9m sq ft of space coming to the Yorkshire market over the next few years. This may sound a lot, but it only equates to two-to-three years’ worth of supply. In addition to the imbalance between supply and demand, the sector faces additional challenges including labour availability and the continued rise in construction costs. Interestingly, only 5% of take-up came from the online sector for Q1 2022, while other sectors provided a significant amount, including 3PL, showing the diversity in the types of occupiers currently seeking a 30 Á 26-31.qxp_Layout 1 06/06/2022 14:54 Page 4Next >