Construction needs a million extra hands, but no amount of workers from Poland or from apprenticeship programmes are going to fill the gap. Now, technology-driven reform that makes construction less labour-intensive is being proposed – but is it the game changer the industry needs?
The future of the construction industry is here already. The only problem is that you have to go half way around the world to see it. While off-site construction has never really taken off in the UK, in Japan, what we still quaintly call modern methods are used to build 150,000 homes a year (see box, below).
The Japanese enthusiasm for factory-built housing is partly rooted in the same kind of labour market shortages that bedevil the UK industry. Japan’s ageing workforce has led to a severe labour shortage in the construction and civil engineering industry but it is responding to the crisis by investing heavily in modern methods of construction (MMC) and robotics.
In the UK, Mark Farmer, who recently left Arcadis to set up his own construction consultancy, Cast, has just been asked by the government to lead a review of construction labour force skills (see box, below ). The former Arcadis development director did the spadework in a report that he co-authored for his old firm last year into the demographic challenges facing the sector. This pointed out that the construction industry’s productivity has barely increased in the past 20 years. As such, while many other industries have invested in labour-saving plant and technology, construction depends as heavily on scarce labour as it did in the early 1990s.
The report estimated that the industry requires a million extra workers to cope with looming retirements and the fresh labour demands likely to be generated by growth. The problem, the study warned, is that the pool of unemployed construction workers is nearly exhausted, at 3.4% of the industry’s total labour force. Given the industry’s historically lamentable record in attracting school leavers and graduates, the authors concluded that it will not be sufficient to rely on attracting new entrants into the industry or even workers from overseas. Stewart Dalgarno, director of product development at contractor Stewart Milne, agrees: “You are not going to be able to rely on a heap of people coming from Poland to solve the problem this time round. We need to find a game changer if we want to deliver on productivity.”
The answer, Farmer’s report concluded, wasthat the industry needs to do things differently by fully embracing the greater efficiencies technology can deliver. Chris Jones, director of learning and development at Bam, agrees: “They [modern methods of construction technologies] have a role to play in increasing productivity by reducing the need for so much labour on site.”
So besides looking at the well-worn issues of how to attract new entrants into the industry, Farmer’s review will be looking at how construction can become less labour-intensive. The question is whether the industry can be reformed quickly enough and fundamentally enough that a house, an office, or a bridge can be built using far less labour than is needed now. Will innovations such as MMC, on-site automation and robotics really make enough of a difference to the demand for skills, or is UK construction growth doomed to languish due to the shortage of skilled labour available to meet demand?
Technology to the rescue?
In Japan, Toho Holdings Co’s ¥10bn (£58m) distribution centre for its drugs wholesaling operation, which became fully operational in January 2014, employs about 130 workers, roughly half the number at another one of similar size. Productivity per worker is 77% higher, with robots handling 65% of item-picking, the firm says. According to Hajime Shoji, the head of the Asia-Pacific technology practice at Boston Consulting Group, “growth potential is huge”. By 2025, robots could shave 25% off factory labour costs in Japan, he says.
The Japanese government recently launched a five-year push to deepen the use of intelligent machines in manufacturing, supply chains, construction and health care, expanding the robotics markets from ¥660bn (£3.9bn) to ¥2.4tn (£13.9bn) by 2020.
Steven Hale, managing director of Crofton Design, believes that the UK construction industry is on the verge of the same kind of technological revolution that the steam engine ushered in across industry 200 years ago. “If they can build a self-driving car that will be on the road in the next 10 years, an automatic bricklayer or plasterer is highly likely,” he says.
Robot bricklayers have of course already beendeveloped overseas. The Swiss prototype, the In-Situ Fabricator, can build a house in two days, according to its inventors. However, even they admit that it will probably be a decade before its use is widespread on building sites. So this kind of techno-fix, while undoubtedly enticing, won’t be an answer to the UK’s immediate housing challenge.
But while robot site workers may still be more science fiction than commercial reality, off-site manufacture of building components is a much more mature technology. And Chris Brown, chief executive of regeneration developer Igloo, says the off-site sector is on the brink of an investment “mini-boom”.
Laing O’Rourke is putting together plans for an advanced manufacturing facility for commercial projects. Up in Scotland, meanwhile, the contractor CCG has created a 130,000ft2 facility with the capacity to manufacture 3,000 buildings a year. And even housebuilders, which have traditionally been wary about investing in MMC, are getting in on the act. Persimmon has retained the off-site facility in Birmingham that it bought as part of its acquisition of Westbury in 2006. The volume builder uses the factory on the outskirts of Birmingham to build the vast majority of the units that it produces for housing associations. And both Barratt and Crest Nicholson are working alongside Stewart Milne on a project, funded by Innovate UK and the Scottish government, to consider how the building process can be further industrialised. A figure from the Arcadis report claims that use of prefab timber frame cuts labour demand by 25%.
Greater use of factory housing could also pull new sources of labour into the industry, meaning less pressure on the same pools of scarce skilled labour, says Bam’s Jones: “If you are building a building in London, you can take the manufacture of the cladding panels up to Redcar or wherever you have the labour to do that.”
Brown adds that women might be more tempted to work in factories than on male-dominated building sites. “It has proven extraordinarily difficult to attract 50% of the labour force into building houses, not least because of the intense misogyny of the housebuilding industry. Building homes in a factory would have a different culture and would appeal to a wider range of the labour force.”
However housebuilders remain sceptical about MMC’s game changing potential. A Home Builders Federation spokesperson says: “The industry does change and adapt and is continually looking for ways to improve but like all technologies you have to get it to the pointwhere it’s 100% right.”
MMC sceptics are able to seize on problems such as those which have beset the troubled Richard Rogers-designed £60,000 competition development at Milton Keynes, where water seeped through cladding panels and windows.Brown counters that traditional construction is just as bedevilled by shoddy work: “I could give you 100 traditional construction problems for every MMC problem.”
No silver bullet
But even if clients can be won over, moving to off-site construction won’t necessarily remove the need for traditional craft skills.
Richard Claxton, chairman of Bromley-based consultant Pellings, says many developments will still use a mix of traditional and modern methods. “You are still hampered by the supply chain of traditional construction.”
And there will be an inevitable time lag even if the industry moves to a greater off-site footing, says Jones: “It takes a while for these techniques to be accepted and built into the design.” Pointing out that today’s construction projects were often being designed four or five years ago on the basis that they would be built using traditional methods, he adds: “You need to get through that lag effect in the medium term.”
Sarah McMonagle, head of external affairs at the Federation of Master Builders, agrees that modern methods won’t be a silver bullet for meeting short-term housing needs: “It’s not going to solve the skills crisis overnight.”
This means, says the Home Builders Federation spokesperson, that the industry is right to concentrate on boosting training and apprenticeships. “The focus has to be on recruiting more people to build the houses as we are building them today. We can’t meet the current skills shortage with future technology.”
A shift in the business model
However, training and apprenticeships may prove to be inadequate to the task, suggests Farmer’s report for Arcadis. This suggested that the construction labour skills shortage is so endemic that it requires nothing less than a fundamental shift in the housebuilding industry’s business model.
Currently, much housebuilding is done on a “build one, sell one” model. By using traditional techniques to build individual houses, housebuilders can turn the development tap on and off relatively easily. By contrast, pre-manufactured components are inherently less flexible because once they are ordered and cut, they generally have to be used for the same project.
Igloo’s Brown says: “It makes virtually no commercial sense for the volume housebuilders with their existing business model to make use of modern methods.
“With traditional methods, it is also easier to make design tweaks late in the day, says Pellings’ Claxton: “It’s quicker on site but you have to set the design a lot earlier: you can’t fiddle around until the last minute as you can with brick and block work.”
In addition, off-site manufacturing facilities rely on a regular pipeline of work, Brown explains: “Factories are a bit like running an airline: you need to keep them full and you can’t readily turn them on and off.”
These constraints led Farmer to conclude in his Arcadis report that housebuilding must become less wedded to the boom and bust cycles of the “for sale” market.
Fostering a more diverse supply, such as new build private rented homes and custom built dwellings as well as affordable housing, would promote a more consistent flow of the big orders that could keep the housing factory assembly lines full.
Crofton’s Hale believes this approach makes sense. “The problem with boom and bust is that it feeds into the industry’s image problem and makes it harder to recruit new entrants.”
However, Farmer’s analysis runs up against the government’s policy to boost home ownership by shifting subsidies from social housing to supporting first-time buyers.
Richard Threlfall, head of infrastructure, building and construction at KPMG, says on this issue Farmer is right. “The government is obsessed with home ownership. We ought to be focused on good quality housing full stop regardless of getting hung up on the underlying ownership.”
If he sticks to his guns, Farmer’s conclusions could provide some uncomfortable reading for ministers.
Order a home in six weeks
Not so long ago, seekers after housing innovation made a beeline for Sweden and Germany. These days, with delivery a bigger priority than sustainability, they are more likely to hop on a jet to the Land of the Rising Sun. Nearly a year ago, a UK construction trade mission to Japan boasted representatives from some of the industry’s biggest names, including Barratt and Crest Nicholson. They were there to find out how Japanese factories alone crank out 150,000 homes a year - only around 50,000 fewer than the UK builds in total.
Part of the answer is that the Japanese have been investing heavily in pre-fabricated housing for around a quarter of a century. Household names like Panasonic and Toyota have housing component arms alongside specialist manufacturers like Sekisu.
Stewart Milne’s Stewart Dalgarno was on last March’s trade mission where he saw the Sekisu factory. Employing around 150 robots, he says it is 20 times larger than his own firm’s plant, one of the UK’s biggest.
The Japanese embrace of factory production no doubt reflects the centrality of manufacturing within the country’s culture. However, Igloo’s Chris Brown, who also visited Japan recently, says the appetite for prefabricated housing stems from the very different nature of the nation’s housing market. Multi-generational mortgages that last for a century mean that families will typically rebuild on the same plot every 30 to 40 years as their housing needs change. This means that custom-built housing, which his Aviva-backed fund champions, is far more common in Japan than in the UK. Brown says: “You can go into a sales room, customise the home on the salesman’s iPad, then press the button to order and buy.”
From sending the order to moving into a new home typically takes about six weeks, he says, less than a third of what it will typically take for a UK purchaser of a custom build property.
Skills shortage review
Housing minister Brandon Lewis and skills minister Nick Boles this week asked the Construction Leadership Council to carry out a review of the industry’s skill shortfalls. The CLC has asked Mark Farmer of the construction consultancy Cast to conduct the exercise.
The review will examine:
- Evidence of how the industry’s labour model and recruitment practices incentivise both skills development across the sector, including its supply chain, and the introduction of novel techniques such as off-site construction
- How improvements to existing business models could better support the sector’s skills pipeline
- Barriers to greater use of off-site construction
- How the range of participants in the UK housing market could be broadened, such as by increased involvement of institutional funds
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