Memorandum submitted by NG Bailey
EXECUTIVE SUMMARY
Construction is a key sector in the UK economy,
providing not only significant employment and revenues but also
delivering the infrastructure required for the economy as a whole
to remain competitive.
This submission has three key recommendations:
1. The appointment of a dedicated Construction
Industry Minister.
2. An increased focus at Government and Industry
level upon recruitment and training.
3. Increased commitment to modern methods
of construction and sustainability.
1. The appointment of a dedicated Construction
Industry Minister
The Construction Industry is strategically key
to the UK economy. Not only does the industry create significant
wealth (8.2% of Gross Value Added; source: DTI) and employ more
people than the financial services industry (source: ONS), it
also develops the infrastructure (roads, rail, commercial and
industrial property, hospitals and education establishments) that
enables the wider economy to function and remain competitive.
Yet the industry is the most fragmented of all major UK industries,
with an abundance of very small firms, and a poor reputation for
quality and reliability despite some world leading design.
This fragmentation is matched by a multiplicity
of disjointed industry bodies and the lack of a clear industry
voice. With the potential dissolution of the DTI now imminent,
there is a real threat of a strategic but weak sector of the economy
losing what voice it has, and being without real leadership.
Yet the customers of the industry are not fragmented,
as the government sector is easily the largest, with some 40-45%
share of the total market. Yet the opportunity for joined-up thinking
which this should represent is almost completely unrealised in
practice. UK constructors face no common method of purchasing
construction, no common designs, not even universal standards
of design or specification. This even applies to departments which
buy large numbers of potentially similar buldings such as schools,
hospital wards and surgeries despite the known benefits of repeatable
building patterns. Our performance in this regard is wholly at
odds with that of France, for example, where standard designs
are commonplace, and consequent cost savings are substantial.
A DTI study on this has been carried out.
The global focus on the environment, including
the UK Government's commitments under the Kyoto Protocol and the
Energy White Paper, place further emphasis on the performance
of the construction industry as the construction, operation and
eventual de-commissioning of buildings contribute around 35% of
carbon dioxide emissions in the UK (source: IPPC).
The UK construction industry is currently facing
major skills shortages. The problem of insufficient recruitment
and training is longstanding and has so far proved intractable
to many recent governments. It is dealt with in item 2 below,
and represents a long-term threat to the size and competitiveness
of the UK construction industry.
Another competitive threat arises from the increasing
amounts of construction work being manufactured offsite, ie, away
from the construction site in dedicated factories. This move,
which has occurred before in the last century, is again in the
ascendant, partly driven by the shortage of site skills, and partly
by other factors such as the drive for better quality, reduced
accidents, and shorter programmes. An offsite factory can as easily
be in the UK and abroad—which represents a global challenge
to an industry which has long considered itself immune from international
competition within the UK. It could also become a global opportunity
if our nascent offsite industry can establish its self as a world
leader.
Given the strategic importance of the industry,
the recruitment and training issues, the fragmentation of the
industry and the opportunity for the UK Government as its largest
client, NG Bailey recommends the creation of the post of a dedicated
Minister responsible for the Construction Industry. This will
provide industry stakeholders with a single point of contact in
government and provide the opportunity to ensure government policy
focuses on improving the quality, reputation, competitiveness
and environmental performance of the UK construction industry,
with significant cost reduction if the opportunity for standard
designs can be grasped.
2. An increased focus at Government and Industry
level upon recruitment and training
The 2006 Construction Demand/Capacity study,
carried out for the OGC by Deloitte and Experian noted skill shortages
in key areas of the industry, and particularly mechanical and
electrical engineering where global pressures in the wake of demands
for better environmental perfoance in buildings is causing pressure
in all national markets which we cannot overcome by cross border
recruitment. A key cause is the perceived lack of attraction to
our young people in the UK of a career in engineering. The IET,
amongst other bodies, is attempting to garner a coalition of private
and public sector bodies to address this. These skill shortages
are a primary cause of the above inflation cost rises of new buildings
which are being experienced by customers and may create a risk
to the on-time completion of a number of strategic infrastructure
projects.
NG Bailey recommends that the growing issue
of skills shortages should be addressed through:
(a) A commitment by the Construction Industry,
with Government (ie DfES) support, to working closely with the
careers services in secondary schools to educate children as young
as 11 and 12 about the career options available and encourage
them to consider a career in construction.
(b) Enhanced focus on practical qualifications
(NVQs) to ensure that school leavers are equipped to enter a trade,
or apprenticeship, within the Construction Industry.
(c) Increasing resources available to small
and medium-sized employers, through an extention of LSC support,
to them enable to enhance their ability to provide apprenticeships,
and develop their in-house training capabilities.
3. Increased commitment to better building
performance and sustainability
The continuing focus on sustainability, driven
by legislation, popular demand and good business practice, has
introduced new requirements on the construction value chain. The
forthcoming requirement, under the EU Energy Performance in Buildings
Directive, to give buildings energy labels similar to those on
new fridges, will accelerate this.
There is an increasing awareness amongst clients
and investors that initial construction costs are a small element
of the total lifetime cost—financial and environmental—of
the built environment; and for the industry to meet these changing
requirements requires a focus on new methods of cost evaluation.
NG Bailey believes the government needs to be
faster and firmer in defining ambitious medium-term performance
targets; and in implementing structured long-term procurement
frameworks for its own procurement which allow the required collaborative
and innovative relationships to flourish. Such a planned approach
to performance improvement will result in demonstrable reduced
lifetime building costs and will contribute significantly to the
Government's public emissions reduction targets.
May 2007
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