We are one of the largest employers in the UK with the potential to shape our nation’s future. The government must help us to make the most of that opportunity, writes Richard Steer of Gleeds
Imagine if you bumped into your firm’s finance director and they adopted a cheery air as they declared it “super news” that the business had made little to no profit this quarter, had narrowly avoided making a loss, was unlikely to do much better in the next, and was forecast to have one of the worst performing years of any similar firm in the sector. You would surely think they had gone mad.
And yet, that seemed to be the view expressed by the UK’s FD, the chancellor of the exchequer Jeremy Hunt, when he offered up off-the-cuff comments following the release of the latest numbers from the ONS. These showed that we had just swerved going into recession but were predicted to be the worst performing nation in the G7 by the IMF.
Apparently inflation, interest rate rises, labour shortages, strikes and even the World Cup were to blame for our lack of growth. You will note there was no mention of Brexit or his predecessor’s kamikaze mini-Budget.
Nearly nine in 10 construction professionals are concerned about rising inflation sapping confidence in the market and threatening future schemes
Our own sector is still seeing overall growth of just below 1%, driven by private new housing which posted a 2.9% rise, while non-housing repairs and maintenance was up 1.7%. However, growth is miniscule and our latest survey shows nearly nine in 10 construction professionals are concerned about rising inflation sapping confidence in the market and threatening future schemes.
Some 87% said that inflation was having an impact on the viability of projects, with over 90% believing that a prolonged period of recession will lead to a slowdown in activity in 2023. Not great news at this early point in the year – but also not unexpected.
Having read the Latham, Egan and Farmer reports of the past, I think we are at a tipping point where we must take a serious look at what we need to do to improve and, more importantly, what steps we are going to initiate to get there.
The quarterly snapshots of the economy from the ONS are useful but they do not provide any strategic insight, which is what I feel is very much missing. It is ironic that Liz Truss, our most short-lived PM, for all her numerous and catastrophic failings, was right when she highlighted that a key element of the mix and our largest inhibitor to growth both as a sector and as a country was our chronic lack of productivity.
This topic gets couched in unhelpful and emotive language where we all tend to think we are being criticised for being lazier than the French or less industrious than the Germans
This is why I welcome the launch of the Building the Future Commission and am delighted to be playing my own small role, looking at how workplace culture may contribute to improving the productivity picture. This topic often gets couched in unhelpful and emotive language where we all tend to think we are being criticised for being lazier than the French or less industrious than the Germans.
We are neither of those things. In reality, it all comes down to workplace culture, leadership and investment.
Let’s not beat about the bush, Britain’s productivity during the 2010s was abysmal. The country’s growth in output per hour was the second-fastest in the G7 between 1997 and 2007 but, between 2009 and 2019, it slumped to the second-slowest.
By 2019, British workers produced 18% less per hour than their French counterparts. This contributed to low wage growth, for which we are all now quite literally paying the price. Why did this happen?
According to the Resolution Foundation think-tank, the difference in GDP per hour worked between French and British workers is almost entirely explained by differences in capital invested. Among members of the OECD, gross fixed capital formation – which measures the value of acquisitions of new or existing fixed assets by the business sector and governments after deductions – averaged 22% of GDP. Here it was just 18%. This needs to change if we are to progress as a country in relation to our competitors.
The Bank of England estimated that Brexit depressed investment by more than 25% over the five years up to 2021. Covid then impacted the supply chain, which further foiled investment plans.
Where we lead, others will follow and, while we have hurdles ahead of us, I for one am looking forward to playing my role in shaping that future
We now have higher corporation tax measures supposedly mitigated by rewards for investment. However, if the recent decision by Astra Zeneca to choose Ireland over England to relocate a £300m manufacturing site is anything to go by, then tax hikes and the decision to leave the EU are not proving attractive to large employers in spite of investment incentives.
As a sector, we are one of the largest employers in the UK. Where we lead, others will follow and, while we have hurdles ahead of us, I for one am looking forward to playing my role in shaping that future. As our ever-optimistic chancellor may be saying as he prepares for his upcoming Budget in March, we never have problems, we only have opportunities.
Richard Steer is chair of Gleeds Worldwide and the Building the Future commissioner
Building the Future Commission
In the coming weeks we will:
- Host our first regional roundtable with our partner Constructing Excellence in the East of England region in mid March
- Convene our first commissioner panel meeting at the end of March
- Interview two big hitters in the world of infrastructure for the infrastructure stream
- Examine whether the qualifications landscape needs to change and assess whether more flexibility is needed for our education and skills stream
- Investigate how for-profit affordable housing can deliver the homes we need for the housing and planning stream
- Assess a new model of procurement used by the Ministry of Defence for the project delivery and digital stream
- Look at models of flexible working in the industry for the workplace, culture and leadership stream
About the commission
The Building the Future Commission is a year-long project, launched to mark Building’s 180th anniversary, to assess potential solutions and radical new ways of thinking to improve the built environment.
The major project’s work will be guided by a panel of 19 major figures who have signed up to help guide the commission’s work culminatuing culminate in a report published at the end of the year.
The commissioner include figures from the world of contracting, housing development, architecture, policy-making, skills, design, place-making, infrastructure, consultancy and legal.
The commissioners include Lord Kerslake, former head of the civil service, Katy Dowding, executive vice president at Skanska, Richard Steer, chair of Gleeds, Lara Oyedele, president of the Chartered Institute of Housing, Mark Wild, former boss of Crossrail and chief executive of SGN and Simon Tolson, senior partner at Fenwick Elliott. See the full list here.
The project is looking at proposals for change in eight areas:
- Education and skills
- Housing and planning
- Building safety
- Project delivery and digital
- Workplace culture and leadership
- Creating communities
Building the Future will also undertake a countrywide tour of roundtable discussions with experts around the regions as part of a consultation programme in partnership with the regional arms of industry body Constructing Excellence. It will also set up a young person’s advisory panel.
We will also be setting up an ideas hub and we want to hear your views.