If we want the government’s industrial strategy to work for our industry, construction must offer a proposition based on collaboration, investment and innovation. Here’s how we can do that
Ponder this: the UK construction industry employs 18 times the workforce of the aerospace industry. It generates 10 times the GDP of the automotive industry. So why do we have an industrial strategy for aerospace and automotive, but not for construction?
Three reasons. First, practical; an industry of many voices is hard to deal with. Second, rational; the effort of successive governments has been invested where they expect the greatest return, in productivity and growth. Construction is seen as big, but boring. Third, political; since 1979 the ideology of both main political parties has been instinctively laissez-faire (which translates approximately as “you’re on your own mate”) and transactional. Government support has been reactive to the sectors which organised themselves. Construction has not.
So does this government’s industrial strategy offer anything new? Not practically, insofar as it is clear any support will still be reactive. To quote from January’s Building our Industrial Strategy green paper: “The government will respond positively to compelling propositions.”
I sense the government wants to help. Lord Prior, the new construction minister, wants to hear how UK construction can be a success
But emotionally there is a change. I sense the government wants to help. Lord Prior, the new construction minister, wants to hear how UK construction can be a success and how the government can help in that. And I believe the construction industry can organise itself, and can make its case.
The first step is to articulate the prize, in terms of productivity and growth. History suggests that could be hard. This is an industry whose productivity has been basically flat since 1997 and is now 20% below the UK average, and whose output took a nosedive in the 2008 recession. But an industrial strategy is about looking forward not back.
Management consultant McKinsey has estimated that technology could cut costs in construction globally by 40%. The UK’s construction strategy is more conservative at 33%. But 33% of a £120bn industry is a big number – £39.6bn to be precise. That means £39.6bn of productivity gains to be unlocked. If UK construction could lead the world in efficiency, the idea that it could become a serious export industry doesn’t look so daft after all.
Step two is to set out what our industrial strategy needs to comprise in order to deliver the Construction 2025 vision.
Here is my seven point plan:
- Align behind the Construction Leadership Council (CLC) The government has been explicit that it will only work with a sector “which can organise behind strong leadership”. If we want an industrial strategy for construction then we all need to accept that the CLC should lead those discussions, and be willing to implement its recommendations as to how our industry is organised.
- Launch a campaign to promote the industry, especially to the millennial generation Engineering needs to be associated with making the world a better place, not delays on the railway. Bricklaying needs to be associated with building homes and communities, not rain and mud.
- Sort out training and apprenticeships throughout the industry, not just in particular disciplines like railway engineering Mark Farmer’s report is a blueprint for the way forward. I would start with fundamental reform of the CITB and put in place a single apprenticeship portal for the entire industry, so it is as easy to apply to work in this industry as it is to apply to university.
- Invest jointly in innovation, to raise the level of R&D spend Spending on research and development should shift up from the current paltry 1% of revenue to nearer the circa 4% spent in the aerospace and automotive industries. The use of off-site manufacture should become the norm, not the exception. This will require clients to invest alongside contractors and could involve setting up an industry-led UK national construction innovation centre.
- Promote collaboration throughout the supply chain Building information modelling (BIM) is just one component of that. Data on public assets needs to be recognised as a public good and made available on common platforms. The buying behaviour of clients is also key.
- Reform procurement Clients buying a fixed price for supposedly fixed outputs is the fundamental cause of the structural weakness of the industry. We need clients to buy on the basis of long-term partnership, buying capability not output, and focussing on whole-life efficiency. This is the Infrastructure Client Group’s Project 13 agenda, to be launched shortly.
- Create a single pipeline platform This would allow the entire industry to have visibility of forward demand and allow it to invest accordingly. The government has now consolidated its infrastructure and construction pipelines, but 70% of the industry value is fragmented private demand.
So where is the ask of government in all this? I have been deliberately silent on that. We need to accept that 90% of the solution lies in our own hands as an industry. Then we can set out for Government a “compelling proposition” it cannot refuse.
Richard Threlfall is head of infrastructure, building and construction at KPMG