With the turbulent weather this summer, there are winds blowing across the construction industry which could cause lasting damage.
There is so much macro-level uncertainty from Brexit and the shaky Government majority, but beyond that there are issues with construction supply chains which have according to some recently led to Carillion being on the receiving end of bad news. And this all in the context of needing to close the delivery gap and deliver 250,000 homes per year.
Influential commentator Rudi Klein, head of the Specialist Engineering Contractors Group, recently wrote in a letter to the FT that the Carillion saga, which have seen its shares crashing, has “exposed the fragility of the finances of the top UK contractors.” His strong words included accusing major contractors of transferring all financial risk to their supply chains, manipulating payments, and retaining cash as “security” for performance, all “key barriers to improving the industry’s performance and productivity.”
This comes shortly after the official Government response to Mark Farmer’s review of the construction labour model, which actually came out last year so the Department of Business, Energy & Industrial Strategy (BEIS) could have been quicker on the uptake. Farmer was commissioned by the Construction Leadership Council due to its concerns that “productivity and capacity are undermined by the sector’s reliance on subcontracted labour.”
Given all of the issues with the supply chain, and delivery of housing in general, are the strong winds blowing from the offsite community going to shake many traditional housebuilding supply chains in future?
No surprise that the Government wants the construction sector to implement Farmer’s recommendations, and be more productive, ensure design quality and workmanship, and be more innovative. The nuts and bolts of ‘how’, as ever, isn’t being prescribed. As well as bolstering training via the CITB and introducing digital ways of working however, perhaps the most fundamental change being suggested for the housing sector by BEIS is the recommendation that it be used as a “scalable pilot programme” for “changing commissioning trends from traditional to pre-manufactured approaches.” In short, moving to offsite.
Given all of the issues with the supply chain, and delivery of housing in general, are the strong winds blowing from the offsite community going to shake many traditional housebuilding supply chains in future? Will we see it perhaps replaced by something, if less lucrative for some at the top, perhaps more robust and fit for purpose? The CLC only gives brief glimpses of how it thinks that the “longer term collaborative relationships” that it sees as possible from pre-manufactured approaches could be formally rolled out however.
A febrile environment
Apparently Government “should act to provide an ‘initiation’ stimulus to innovation…by promoting the use of pre-manufactured solutions through policy measures,” says CLC.”
It says this should be prioritised either through “conditional” investment in PRS, promotion of more pre-manufactured social housing, and/or direct commissioning. The Government, says CLC, should also consider “planning breaks” for off-site developments.
Hopefully the Housing White Paper remains a viable document in the current febrile environment, given that it contains the £1.7bn Accelerated Construction Programme, which focuses on ‘Modern Methods of Construction’-based solutions to delivering thousands more houses than we are.
Who knows what this all really means or whether even part of it will be systematically pursued, rather than more fine words and offsite continuing to be something of a ‘nice-to-have’ on the fringes of the industry? Once Legal & General starts turning out homes on a daily basis from its new factory however, maybe the industry’s hand will be forced. Will a more collaborative supply chain necessarily result from more a coordinated, quality-focused off-site mainstream industry? We may soon see.
James Parker is editor of Housebuilder & Developer magazine
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