Construction industry faces modernisation, death, or worse

Guest blogger Tom Jarman of Low Carbon Journey Ltd analyses the state of the construction industry, and calls for the public sector to lead change by demanding higher quality from builders. 

This blog was original published on the St Gobain Multicomfort website in December 2017.

Recently, I heard Mark Farmer speaking about his report from 2016, Modernise or Die. He’s an inspiring speaker and it was a great presentation. I’m sure I wasn’t the only one in the room who was reinvigorated to go out and make a difference in a sector we enjoy working in and want to attract new people to.

However, the elephant in the room with the Farmer Report is, of course, haven’t we been here before? Egan, Latham… that’s 20 years now of frustration with the construction sector and to a greater or lesser extent, appeals for it to pull its proverbial finger out.

Time to address some issues

Mark tackled this directly, and described the difference this time as being a ‘burning platform’. He points out that the construction sector has survived each downturn, which has led to a sense of complacency that it will survive the next one. And this complacency is not entirely surprising; we will keep constructing, and there will continue to be a construction industry.

We have to place this complacency in the land of lost opportunity. Construction productivity hasn’t really improved since the early 1990s, and this drags down the productivity of the entire UK economy. What’s more, productivity is key to decent wages and a knowledge economy.

This is a real challenge for post-Brexit Britain. The Construction Leadership Council summarises this lost productivity is the equivalent of foregoing some £15bn a year. This is the equivalent to one extra Crossrail – every year. We wouldn’t need to decide whether to fund the Northern Powerhouse or Crossrail 2, we could spend what we currently are and get both.

But there’s a more practical issue. At the end of each cycle, we’re building fewer houses, as shown in the graph, and building them through a much less diverse supply chain. Figures from the FMB suggest that firms that build fewer than 500 homes a year have a smaller percentage of output than ever before.

Source; New Civic Housebuilding (Shelter, 2017), p14 

And our clients’ understanding of quality is not improving, as a deskilled client base uses D&B contracts to pass on risk. At the retail end, perception of quality is superficial; although some past complaints about the quality of some new build homes may be valid, they don’t tend to be about fundamental building performance.

All of this indicates a less resilient, sustainable construction industry, increasingly transactional and lacking the client leadership that might challenge business as usual.

My concern about our current situation is that so much power has now transferred from clients that they are probably not in a position where they have the skill and confidence to challenge existing industry practice. And industry practice, as Mark Farmer very clearly outlines, isn’t as good as it should be, and the industry is far from being well placed to cope with the demographic, carbon and productivity challenges of the future.

But I’m not sure the alternative to modernisation is death.  I think it’s worse; slow decline, and lost opportunities – for exports, attracting and retaining young, enthusiastic workers, and to fill the housing gap within available resources and with good quality housing.

So what can we do?

Think of where we would like to be; an attractive, well-paid industry respected for its innovation and quality.  And what would create the space for this?  A much more demanding, informed client base, focussing on outcome.

The real challenge is how to identify and engage these leaders. My own belief is that there are three carriers of change:

  • The Construction Leadership Council, as an enabler and clearing house for those on the industry and client sides of the fence that want to have a different conversation. Not every client wants to change (a point made well by Rob Charlton) but the CLC is a great mechanism for engaging with those that do, and could create a route map for others;
  • The Government, and in particular the Homes and Communities Agency, as an absolutely key influencer. Every building they commission as a client is an opportunity to reject Building Regulations at lowest cost. This is currently the default standard, and reinforces all the behaviours in the construction industry that we collectively say we don’t want.  The Government has an opportunity to lead by example, including using whole life costing to ensure public money is invested well for future generations; and
  • Social landlords, the hidden volume client who collectively commission some 20 per cent of all newbuild housing in any year, and own and manage some 17 per cent of the national housing stock over the long term. The National Housing Federation has an ambition for the sector to build 120,000 homes a year by 2035. There is a critical decision point here; do they become another volume builder, or do they lead as clients and invest in good quality, comfortable, climate-resilient homes?

We need to come together, and be more engaged and driven to improve our industry. And ironically, if you’re reading this you’re probably already engaged. But we need to reiterate to clients at every opportunity that there is not a linear connection between build quality and cost, using examples in practice to show what can be built within cost ranges they will be familiar with.

If we can’t do that, then more power to the naysayers.  And what is the next report on the construction sector going to be called?  ‘Modernise or Die’ raises the stakes; that leaves us ‘Turn off the Lights’ as volume IV.  None of us want that – do we?

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