CONSTRUCTION INDUSTRY ROUNDTABLE
What does the future look like for the construction industry?
The institution invited a select group of industry leaders to a roundtable event to discuss the current challenges and opportunities facing the construction industry. The group covering the construction industry spectrum included representatives from the client, tier 1 contractors, tier 2 contractors, subcontractors, solicitors, project managers and consultants.
Those joining the topics for discussion were Derek Adams, RSK; Peter Banathy, Diales; Jeffrey Brown, Howard Kennedy LLP; Sam Costello, Turner & Townsend; Matthew Garrett, Dalkia; Steve Goodwin, GVE Commercial Solutions; Dan Hollis, Apex; Shy Jackson, Bryan Cave Leighton Paisner; Marie Leaphard, RLB; Niall MacInnes, Mott Macdonald; Jim McCluskey, Kier Nuclear; Alison Powell, BAM and Sarah Townsley, Amaro Signalling.
The sessions were chaired by Jeffrey Brown, Steve Goodwin and Jim McCluskey. Below are select summaries of the outcomes of those discussions.
It is no secret that the construction industry is suffering a major skills shortage. As the construction industry accounts for approximately 6% of GPD, any skills shortage is likely to impact the economy. Put simply, there is not enough young people coming into the construction industry; the lack of cognate degree apprenticeships likely contributes to this. That said, the construction industry has last year seen its first increase in apprenticeships since 2016, with many choosing a construction-related career path, rather than take on an average £27,000+ debt to study for a degree.
In the past the construction industry had relied significantly on immigrant labour, with lots of people coming over to the UK from the European Union, however Brexit changed the dynamics of that completely.
According to figures from the Construction Industry Training Board (CITB) the construction industry will need an additional 251,000 workers to meet expected demand by 2028. In the past the construction industry had relied significantly on immigrant labour, with lots of people coming over to the UK from the European Union, however Brexit changed the dynamics of that completely.
This, compounded with the challenges of COVID following fairly quickly afterwards, meant that a lot of the Eastern Europeans people departed back to their native homes and the industry has struggled to recover. By way of example, Hinkley Point C will likely need approximately 6,000 electricians in the next few months and we know that provision does not exist presently in the UK.
Some might believe engineers in Europe are regarded more highly, where construction roles are seen as a prestige profession. However, in the UK, it is often though that people simply fall into construction. In the UK, it needs to be seen as a viable career path and it is felt the industry needs to spark interest with 11-12-year-olds; way before children get to college age.
Hinkley Point C will likely need approximately 6,000 electricians in the next few months and we know that provision does not exist presently in the UK.
There is also a shift in expectation of what people want in their career. Construction is often regarded as a hard industry to provide a good work/life balance, especially at a site/trades level. We need to understand what motivates people or they won’t choose construction as a preferred trade or profession. It is becoming clear that many young people prefer the idea of some flexibility; they are wanting, or at least preferring, a healthy work/life balance.
They want to be able to spend some time working on the beach in Spain; they want to be able to spend more time at home, perhaps with young families. These desires and wishes need to be seriously considered and in construction roles this may be very difficult. Diversity is also a major issue for the construction industry, with many people not wanting to join for various reasons, perhaps including the perceived construction culture.
The challenge is not only attracting diverse talent but retaining it. With approximately 20% of the construction industry over the age of 50, there is also the prospect of the industry falling off a cliff in a few years’ time if the right numbers of young replacement people are not employed now. That point of attraction – and it does vary with age – is perhaps related to the image of the industry. The principles used for engagement are so different today as to why a lot of older people joined the industry or indeed would have seen the industry in a positive light. That needs to change.
There is also a shift in expectation of what people want in their career.
To ensure long-term project sustainability, changes to procurement models and contract structures are needed to address the ‘race to the bottom’ on pricing. The message should be out there – that better construction should cost more – but there is always someone who will tell the client that they can do it cheaper! There perhaps needs to be a move away from single-stage competitive tendering towards more negotiated, two-stage procurement models. This allows for better collaboration, risk sharing and hopefully more realistic pricing.
To ensure long-term project sustainability, changes to procurement models and contract structures are needed to address the ‘race to the bottom’ on pricing.
The construction industry needs to encourage the use of frameworks and preferred supplier arrangements, where contractors are selected based on capability and track record and not just lowest price. There also needs to be more emphasis of sustainability and social value in any bidding process. This can help avoid the constant bidding-down of prices. Contract structures should incentivise the right behaviours, such as using pain/gain share mechanisms (as is the case on most major NEC projects), target cost contracts and other models that perhaps more align the interests of the client and contractor.
Clients also need to be educated, especially in emerging sectors like renewables, on the importance of realistic budgets and the risks of driving prices down too far. Consultants and project managers should play a role in this and the industry also needs to encourage more long-term, framework-based contracts with public sector clients. This would likely give construction firms greater visibility and confidence to make investments in their workforce.
Henry Construction owed creditors more than £43m at the time of its collapse – a firm that previously had a turnover of £400m – similarly, Buckingham Group owed over £108m.
That confidence will help alleviate a growing concern around the volatility of the construction industry with the recent collapses of major contractors. Henry Construction owed creditors more than £43m at the time of its collapse – a firm that it is said previously had a turnover of £400m – similarly, Buckingham Group owed over £108m. The most recent collapse of ISG lead to the loss of around 2,200 jobs for the construction sector and it is feared that perhaps over £800m could be owed to suppliers. Casualties like these have a massive impact as they affect the whole of the construction industry, right down through the supply chain who often rely on the projects for their own survival.
Robert McAlpine recently posted a loss of £100m and as a result it is understood is now returning to a more selective process when tendering for projects. There are 101 different reasons why not to take a job if you want to be successful, however you need sufficient experience in your management team to be able to spot those problems. However, for a smaller company, that perhaps doesn’t have a full order book full for the next several years out, that selective risk can be dangerous.
It is believed that the construction industry accounts for around 40% of total UK carbon emissions. That, combined with the figures that the UK Green Building Council estimates that over the next 30 years, that 95% of construction industry emissions will come from existing buildings, it seems obvious that the construction industry needs to change dramatically if net zero is to be achieved by 2050.
Casualties like these have a massive impact as they affect the whole of the construction industry, right down through the supply chain who often rely on the projects for their own survival.
The apparent slow or delayed adoption of new materials due to regulatory and financial barriers, emphasizes the need for client flexibility and innovation. The public sector must take the lead to drive this innovation with a requirement for investment and the availability of more materials and better construction techniques.
The key maybe is to consider a more collaborative and strategic approach, leveraging the collective voice and influence of the construction industry to ensure the insights and ideas are effectively communicated to the decision-makers who can drive the necessary changes. The construction industry must work together to develop effective strategies for lobbying government and policymakers to support new green technologies and materials.
The apparent slow or delayed adoption of new materials due to regulatory and financial barriers, emphasizes the need for client flexibility and innovation.
These collaborative initiatives between industry bodies, trade associations and the public sector, will help to accelerate the transition to net zero. A deep-dive for information is essential into organisations like the Construction Leadership Council to understand its current initiatives and priorities around innovation and sustainability.
There is a need to explore opportunities to jointly advocate for policy changes or funding support from the government that can enable more sustainable and innovative construction practices.
The key perhaps is to establish an open and ongoing dialogue with influential organisations to align priorities, leverage complementary capabilities and drive meaningful change across the industry. Then, and only then, might the construction industry be able to implement positive change and outcomes.
The institution would like to thank Jeffrey Brown and Howard Kennedy LLP for kindly hosting the event.