As we enter the 2020s, talk of a ‘Boris bounce’ is getting an enthusiastic response from construction.
With the Conservative Party having pledged £100bn over five years for transport infrastructure projects, plus £10bn for its Single Housing Infrastructure Fund, there is a growing sense of optimism in the sector following Boris Johnson’s electoral win.
However, after nearly five years of faltering growth, these new opportunities need to come together with a commitment to tackle the industry’s endemic productivity problem. For government money to kickstart real growth in the infrastructure sector, the industry needs to take an introspective look at the systemic challenges it faces. Productivity is the most deep-rooted of all.
Where the opportunities are
There are plenty of short-term distractions in the industry’s in-tray, of course, not least the looming post-Brexit trading relationship with the EU.
Rebuilding supply chains affected by EU trade agreements, anticipating changes in immigration laws, implementing the re-alignment of built environment design and carbon standards, and undertaking an overhaul of existing UK construction contracts beyond the end of January all weigh on a sector that in any case lacks the capability and investment to take on and manage risk, and is under constant pressure from customers to deliver more for less.
But perhaps 2020 represents a great opportunity for the sector to band together and face head-on the challenges arising from these events, and to seize the opportunities they will create to tackle the underlying issue.
“The industry needs to take an introspective look at the systemic challenges it faces. Productivity is the most deep-rooted of all”
According to our most recent UK Market Intelligence Report, construction’s dysfunctional relationship with productivity is exemplified by the lack of attention it receives from contractors. Among those we surveyed, productivity ranked third from bottom on a long list of key challenges facing the industry. Yet poor productivity risks severely limiting the sector’s growth potential, stifling progress long after the current cyclical issues have faded.
As a sector, we cannot pile responsibility for this change onto tier one and tier two contractors alone. The UK government needs to respond – including by adding tangible financial action to its increasing willingness to act.
Invest in the right places
Significant investment is critical to creating the virtuous trajectory within which new innovations and methods might drive up productivity. The government, through the Construction Sector Deal, has provided a great foundation for this. The deal commits the government to increasing the National Productivity Investment Fund to £31bn, through investments in housing, digital infrastructure and transport.
The government has shown itself willing to put emphasis on modern methods of construction (MMC) through the sector deal, with offsite manufacturing technologies being a central focus. This emphasis now needs to be backed up with direct investment into offsite manufacturing hubs, to provide the sector with a means to move towards a true component-led approach, where the entire supply-chain can adopt and access common methods.
The early signs are encouraging.
Housing minister Esther McVey announced a £38m funding package in October 2019 to speed up the development of 2,072 homes across the country, which will be built by the Local Authority Accelerated Construction Programme – a scheme that encourages the use of MMC. McVey also revealed the government’s ambition to develop a new centre of excellence for MMC in the North of England.
If this ambition can be met with a firm commitment to financing future MMC projects in the early part of the decade, it could spark real change throughout the supply chain.
