Conflict, costs and a changing world order place construction at a crossroads

Only a few weeks ago, the construction sector was awaiting positive news of a settling economy.The chancellor’s spring statement had made clear there was no fresh spending to be announced, but government’s priorities had been clearly set out through its various strategies. Inflation was easing and interest rates falling. There were promising signs of returning market confidence.

Much of that optimism has now been pushed aside. While volatility has become baked into our industry in the past decade, the impact of escalation of conflict in the Gulf in just a month threatens to be one of the greatest shocks yet.

We’re already seeing stark impacts of oil disruption. The latest S&P Global UK Construction PMI shows input costs rising sharply, with higher material and energy prices and heightened uncertainty pushing clients to pause investment and delaying new orders.

Many industries are affected, but construction remains particularly vulnerable to cost increases and global economic trends

Many industries are affected, but construction remains particularly vulnerable to cost increases and global economic trends. The world is holding its breath for peace talks to progress. However, it’s clear that we shouldn’t expect a rapid return to conditions as they were at the start of the year.

Immediate disruption will of course be front of mind for the industry. However, we cannot ignore the longer-term need for transformation too. The way we build needs to shift if we are to deliver against government’s ambitions – from reindustrialisation and shoring up defences, to decarbonising and diversifying our energy sources, and providing better economic and social outcomes.

This all relies on our capacity to drive digital change while navigating the impacts of the current headwinds.

Unlocking transformation through more targeted resource

Oil has long been nations’ keycard to the global economy. Now, a second currency is set to disrupt the world order: technology.

We are in the early stages of a technological revolution through which artificial intelligence and digital capability will begin to define countries’ competitive advantage. Tech will become the driving force to deliver governments’ economic and social objectives.

Construction is a critical enabler of this new world order. Ours is the sector which will deliver the changing industry and infrastructure required for a digital world – from data centres and manufacturing facilities to clean energy.

Confidence to invest will naturally be hard to come by and experience tells us that digital investment could suffer

Our ability to play this role well relies on digitisation within our own industry – embedding digital tools and platforms to improve productivity and maximise our capacity. Confidence to invest will naturally be hard to come by and experience tells us that digital investment could suffer. But the stakes are too high to ignore the fundamental paradigm shift towards technological capacity as power.

The shocks of the war in the Gulf are seismic and will not fall evenly across the sector. The government can and should help, but we need to be realistic about what this will feasibly look like.

Firstly, we need to know that commitments already made will continue. Focusing on funded programmes will help provide the certainty to drive confidence for the sector to invest in its capabilities, in turn incentivising and encouraging the crowding in of wider investment.

As the industry’s biggest client, government should prioritise the game-changing programmes which will have the greatest potential to unlock wider transformation for our digital economy.

Commitment to the eight growth-driving sectors in the industrial strategy has already provided a starting framework through which we can work towards a technological future. Investment in fleet-based SMRs or in the defence ecosystem, for example, not only provides near-term economic and security benefits through individual programmes, but builds lasting expertise and capacity.

Reimagining our approach to skills

Game-changing technologies will also fundamentally reshape our workforce and skills requirements. We therefore must look at both together.

The National Infrastructure and Service Transformation Authority (NISTA) has gone to great lengths to make the infrastructure pipeline and workforce needs more comprehensive than ever: an estimated 670,000 workers needed every year to deliver the 734 programmes in the pipeline, of which 81 now sit within a streamlined Government Major Projects Portfolio (GMPP).

These are strong first steps, but a bigger conversation is still needed over what skills we will need in a technological future. The current government rhetoric around “brickies, sparkies and chippies” risks relying on old strategies to solve new problems.

Traditional roles will still be important. However, building data literacy and digital expertise across construction is badly needed. We need to see a co-ordinated, strategic approach to the planning and sequencing of skills if we’re to deliver the building blocks of a digital superpower.

We are navigating, simultaneously, severe shocks and systemic transformation – a colossal challenge

This must be a two-way conversation between government and industry – with our sector actively involved to assess demand coming down the track and invest in capabilities which both plug today’s gaps and build an effective, modern, digitally-led construction sector.

Meeting the demand for the digital infrastructure and power generation to drive the country’s transformation and economic growth won’t happen through rhetoric, but through delivery. That relies on people – skilled, supported, and enabled by modern tools.

We are navigating, simultaneously, severe shocks and systemic transformation – a colossal challenge. But we have proven ourselves, time and again, to be a resilient and adaptable industry.

With smart prioritisation of resource, co-ordination with government and one eye always trained on building our technological future, construction can – and must – play its role in transforming not just our sector, but the wider economy too.

Patricia Moore is managing director, EMEA, at Turner & Townsend