Karen Fletcher looks at the elephant-sized gap in recovery plans

On the 1st June 2020, the Construction Leadership Council (CLC) launched its Recovery Plan for the UK Construction Sector.

It envisions a future for a sector that the CLC believes is “uniquely placed to drive the national economic recovery”.

The CLC plan has ambitious goals that include increasing prosperity across the UK; decarbonisation and modernisation through digital and manufacturing technologies. 

The Recovery Plan covers the next two years, broken down into three stages: 

Restart - 0 to 3 months: Increase output, maximise employment and minimise disruption

Reset - 3 to 12 months: Drive demand, increase productivity, strengthen capacity in the supply chain

Reinvent - 12 to 24 months: transform the industry, deliver better value, collaboration and partnership. 

While providing sensible ideas, it does seem to miss the same elephant in the room

Karen Fletcher Karen Fletcher Content Director of Rocket Content

The long road ahead

The industry has a steep climb ahead of it. The Office of National Statistics (ONS) reported that construction activity fell by 2.6 in Q1 2020 and by 5.9% in March.

The Construction Products Association (CPA) estimated that 2020 would see a fall in construction activity of 25%. 

The CLC believes that recovery will be gradual, taking around two years, but with most of that taking place in 2021.

The Council points out that costs and delivery times are likely to increase, and that productivity will be lower as sites adhere to social distancing rules. 

3 steps to reinvention

Perhaps the most interesting stage of the CLC plan is ‘Reinvent’, where the Council reveals its long-term vision. There are three elements to the CLC’s reinvented construction industry. 

The first is transformation. The aim at this point is for construction to sustain growth “through adoption of digital and manufacturing technologies.” The benefits to clients are better quality outputs such as low carbon, sustainable buildings. 

The second element is value, which means changing procurement practices to focus on whole life performance of buildings and infrastructure.

And the third part of the proposed transformation is ‘building stronger partnerships between the industry and its clients, supply chain firms’. The CLC also calls for investment in upskilling the workforce. 

The elephant in the room

Anyone in our industry knows how many reports, experts and Ministers have urged construction companies to modernise and offer better value.

The CLC’s Roadmap generally heads in the same direction. But while the plan provides some sensible ideas for moving out of our current difficulties, it does seem to miss the same elephant in the room that other reports have left unaddressed – retentions. 

The CLC Roadmap to Recovery calls for ‘fairer payment practices’ throughout.

Yet there is a focus on industry achieving that itself – something it hasn’t managed to do in decades (or longer). The CLC has publicly backed Build UK’s plan to end retentions altogether by setting minimum standards, which is admirable. 

But Build UK does not accept that there is a need to protect retentions money (as supported by the SEC Group and put forward in the Aldous Bill).

Avoidable potholes

This omission may be an unfortunate pothole in the CLC’s road to recovery.

Even before COVID 19, we saw retentions disappear in the wake of bankruptcies, with the construction industry’s many small businesses left owing tens of millions. 

As the CLC itself points out, the structure of the construction industry is an inverted triangle with 900,000 sole traders and 405,000 firms resting on a small base of 300 large contractors.  

The Build UK plan for retentions is to push Government to abolish the practice by 2025. A long-term goal that includes ending retentions altogether is excellent. But what the industry needs right now is protection from the domino effect when bigger firms collapse.

It might be better to push for a much faster end to retentions (i.e. this year). Or to adopt the ring-fencing approach with project bank accounts for the next two years to provide much-needed stability.

Perhaps these are bold suggestions, but if the aim was to abolish retentions five years from now, why not fill in the biggest pothole on the road to recovery before we fall into it?

Karen Fletcher is Content Director of Rocket Content.