Blog: In order to survive, the construction industry must innovate.

29 Nov 2017

Construction’s traditional business model must be consigned to the past if the industry is to survive and innovate says Mark Farmer, CEO of Cast Consultancy.

Past policies like Help to Buy sought to stimulate demand in order to encourage supply, with little or no attention paid to the way that we actually deliver homes. So the most recent UK Budget was a refreshing break from the past, with the Chancellor recognising the leading role government has in modernising construction, and in turn, boosting housing delivery.

The Budget targeted the construction industry’s productivity and skills, but it’s important the money promised is deployed in a meaningful way. The £170m ‘sector deal’ and the £34m specifically assigned to developing construction skills must be used strategically to modernise production techniques, developing a new workforce that uses both digital and improved traditional construction skills. Without a dual approach to the current skills crisis that aims to both reskill and upskill, our industry will not be able to improve its flat productivity in the face of seismic capacity shifts, such as Brexit and an ageing workforce.

Most significantly, the UK Government imposing a presumption towards modern methods of construction (MMC) on the bulk of its direct capital spend programme will create the confidence needed in this new – but vital – area. Without MMC, the 300,000 homes a year target is merely a pipe dream, let alone large infrastructure projects like Hinkley Point and HS2.

Through the Government providing strong leadership in the MMC area, there is the potential to establish a new, modern and robust supply chain that can serve the wider construction sectors, including homebuilding. Combined with more integrated procurement models, this will help address the issue of eroding margins and risk, which all contractors are now increasingly susceptible to as control over delivery outcomes becomes more difficult.

As I recommended in my independent review, the UK Government is taking steps to create the right conditions for industry leaders to rethink their perception about offsite manufacturing. By using their purchasing power, the Government can remove three of the biggest barriers to reaping its benefits: lack of scale, high demand volatility and lack of hard evidence of completed asset quality.

‘Construction as Manufacturing’ thinking needs to be significantly scaled up. Without a consistent rate of demand, increasing scale is a huge risk that many manufacturers are unlikely to take on. If the Government actively intervenes in the market to create that demand, starting as it has now confirmed, in sectors such as schools and hospitals, the offsite market will have the assurance and confidence to expand capacity.

To support the Government’s direction here, we are also seeing clear signs that London’s devolved mayoral government is going to show similar leadership, this time in the precision manufactured homes market. The combination of these two policy led interventions could be the game changer our industry has being waiting for.

The tone and sentiment of this budget is just what the construction industry needs at such a crucial time, but we can’t just leave it up to politicians. The scale and scope of change needed means that everyone needs to alter the way they approach the delivery of built assets. We are getting the right support, but the choice remains stark: modernise or die.

Mark Farmer is the CEO of Cast Consultancy.

You can view Mark Farmer’s recent presentation to the CIF Annual Conference in Croke Park here

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