Government interventions in the construction market must avoid perpetuating a broken model
The future for construction is looking pretty precarious at the moment. It does not take a rocket scientist to work out that with a Bank of England forecast of 14% GDP contraction, 8% unemployment and a record breaking low PMI purchaser confidence index we are in for a rocky ride.
Current focus has been on re-opening suspended construction sites and addressing what has become an emotive issue of trading off worker/public safety against a desire to continue to work and avoid a business sector catastrophe.
Unfortunately the site productivity, labour and material supply issues related to continuing with committed construction work are the tip of the iceberg when it comes to the longer-term ramifications of the covid-19 crisis. Economic confidence has been shot to pieces and this will require government intervention to ensure construction has some form of safety net from what could be an unprecedented capacity shrinkage.
Economic confidence has been shot to pieces and this will require government intervention to ensure construction has some form of safety net
The government needs to think seriously about the shape and form of the interventions it makes. Some of these are already visible such as the commitment to accelerated spend such as early HS2 civils packages and further design work. There is already a programme of social and economic infrastructure investment to ensure some demand is pumped into the sector, and this may well be increased.
As with all downturns the real danger is to default to a ‘route 1’ approach which perpetuates a broken model to deploy tax-payer support and deliver built assets. In the housing sector, further Help to Buy funding, government unsold stock acquisition programmes or other supply side grant funding or investment initiatives that are not conditioned on delivering better quality and holistic outcomes would be classic examples of such a mistake.
The political and economic agenda ahead has to focus on a good recovery not any old recovery. When the chips are down certain quarters of our industry will push back on red tape and over-regulation. It is crystal clear we need to make processes such as planning and procurement more efficient not through relaxation of standards but technology enablement and simplification of process. This is not about lowering the bar and society is now expecting more from the built environment than ever before.
That does mean we need to better regulate for decarbonising our built environment. It does mean Building Regulations need to control and incentivise better processes and competent workers that restore public confidence in delivering safe buildings, and it does mean we need to promote design, placemaking and technical quality, not dilute it through promoting a false dialogue about it costing more (the implication being less profits).
Promoting business as usual now would be a Luddite philosophy that threatens our entire sector’s future. We need to build for the long term and change thinking that says the route to winning more work in a demand constrained market is to bid below cost and deal with the consequences later rather than fund sustainable margin and cheaper pricing through new business models that promote efficiency and integrated planning. I am afraid this time around the Modernise or Die choice will become more apposite then ever.
It would not be too difficult to bring central, regional and local government together with housing associations and private enterprise to drive a ‘Homes for Heroes’ type initiative
Now is also the time to build longer-term delivery resilience by reducing dependence on site labour. The gradual shift to increasing pe-manufactured value (PMV) through a combination of the seven categories of modern methods of construction (MMC) will be under the spotlight like never before. The ability to build robust and integrated materials and labour supply chains will be scrutinised heavily and will challenge accepted wisdom in terms of flexibility and subcontract devolvement of responsibility. This might force collaborations and partnerships that we have not seen before to finally address the huge fragmentation we suffer from. It will also challenge accepted procurement models and it will change business and delivery model thinking from ‘contracting’ and ‘building’ to ‘integration’ and ‘assembly’.
So now is the time to amplify not diminish government’s commitment to the 10 pillars of its industrial strategy, ambitions centered on procurement, productivity, skills, R&D, technology, clean growth and the like.
Beyond the government’s commitments to social and economic infrastructure, in the residential sector that I work in, there is the potential for a simple but neat ‘big idea’ to capture what seems to be a unified public and political mood of support in this country. It would not be too difficult to bring central, regional and local government together with housing associations and private enterprise to drive a ‘Homes for Heroes’ type initiative.
Underpinned by a grand coalition of apolitical unity and purpose, it would be aimed at delivering homes to the much broader definition of key workers who have helped us get through the covid -19 crisis. These would be affordable, quality homes, meeting all the carbon, safety and quality ambitions highlighted above, delivered across a variety of rental, ownership and hybrid tenures but all at an acceptable price point. Funded, planned for and procured as a major programme with central and devolved government and Homes England support, it would utilise the very best in scalable innovation and technology.
What a simple way to make sure this crisis can ultimately lead to a positive legacy, for our industry and society – expect to hear more about this in the near future.
Mark Farmer is CEO of Cast Consultancy & UK MMC Champion for Homebuilding. View his latest report on the post Covid-19 implications for construction here