The Perfect Storm and Moving Forward

The continuing challenges around the supply of construction materials and the resulting cost increases and uncertainty has been well documented – but how is the industry responding on the ground? Chris Coward, Head of Project Management and James Carmillet, Head of Cost Management at Business Critical Solutions, (BCS) the specialist services provider to the digital infrastructure industry, share their experiences over the past few months and the advice they are giving the clients moving forward.

Anyone who operates in the construction industry is used to the need of forward planning but as a result of the perfect storm created by the Suez Canal incident, Brexit and the global pandemic, the lack of materials and the resulting cost, uncertainties and increases are beyond anything the industry has experienced before.

“We are used to the steel factories closing down every August and so we can plan for that but this year they have closed earlier without any real guarantee of when they will reopen. This uncertainty has led, in some cases, to bulk buying which has only exacerbated the issue. We have also heard of companies reselling used steel and making a handsome profit on the original price they paid. Elements that have never been difficult to source before such as cladding now have additional 3-month lead time as factories continue to struggle due to covid or track and trace.” explains Chris Coward.

He goes on to say that a similar issue was encountered in Italy where a lot of the steel and concrete needed for plant is sourced in the Lombardy region in Italy which was perhaps the hardest hit by the pandemic, certainly at the start, and was subject to long and severe restrictions. ‘Things are improving there now but production is still severely affected, he adds.

His views are supported by the findings of the latest industry survey commissioned by BCS which collates the views of over 3,000 Senior Datacentre Professionals  across the UK and Europe.  Supply chain difficulties were by far the most highly ranked likely impact on future growth with around two-fifths of respondents citing it.

“This undoubtedly reflects the fact that the construction industry is very reliant on a global supply chain to support the complex areas of Mechanical and Electrical build-out. With some global economies still locked down and others emerging slowly, traditional sources of materials (from base construction materials to more complex M&E components) are more difficult than before and securing alternative sources similarly problematic due to pent-up demand. This means that managing any projects at the moment is increasingly complex and international companies that are building in different regions are struggling to apply standardised models and costs.”

According to James Carmillet, all of this is driving up costs in pretty much every element of a project and it’s not just materials. “The lack of sufficiently qualified workers, many of whom were foreign nationals that have now returned to their country of origin as a result of Brexit, and the effects of international lockdown on the movement of a skilled labour force has resulted in huge annual pay growth with average pay (including bonuses) up 7.3 % and 6.6% (excluding bonuses) for March to May 2021 and the upward trend is continuing.” he explains.

“What we are finding is that both new and established operators all share the same concerns when it comes to building Data Centres in Europe – and it’s mainly about people. They all want to see consultant team members on the ground with knowledge of local planning conditions, local market knowledge, accurate and reliable cost data for that location.  We have an international team with global expertise, offices in the UK and Germany and are looking at other strategic locations for expansion,’ adds James.

He goes on to stress that it is important that companies focus on solutions for their clients as in many cases delaying a project is not feasible and future demand levels for data centres show no signs of slowing.

“Our advice to clients is to procure early and don’t single source but go out to the wider market. Also, our teams can assess the possibility of using alternative products that may be easier to get hold of – for example perhaps not using cladding. In some cases, we are also suggesting reviewing existing facilities to see if they can be upgraded or refurbished to provide a short to medium fix. In fact we are seeing significant opportunities within older facilities with critical system upgrades and SPOF removal.”

Chris believes that some good may come of the challenges. “I think this has been a wake-up call for the UK about how reliant we are on overseas manufacturing

and I believe that this will drive further on-shoring, encouraging people to source locally. This will be good for the economy, employment and sustainability.”

Finally James is clear that the sector needs to work hard to address the skills shortages moving forward. “This has been an issue for over a decade with the financial crash in 2008 leading to a lost generation of technical engineers which has been slow to recover. Recently there have been some promising industry initiatives but many have been put on hold due to the pandemic. Ongoing uncertainty around A level results, challenges for first year University students and a decision by many organisations that taking on graduate trainees and/or apprentices is just not practical has effectively put us back to square one, (although at BCS we have forged ahead with our graduate and apprenticeship programme) and these decisions will severely impact the future.

Given the large numbers of people who have lost their jobs as a result of the pandemic is there a case for government supported on the job retraining for those affected to enter sectors like ours where skills are needed? Surely this would be a win-win situation

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