Examination of Witnesses (Questions 316-344)
MR BRIAN
BERRY AND
MR RICHARD
DIMENT
20 OCTOBER 2009
Q316 Chairman: Good morning. Welcome
to the Committee. Perhaps I could start with a general question.
Do you think the construction industry is able to deliver a street
by street retrofitting programme to provide existing buildings
with the energy efficiency measures that are needed?
Mr Diment: That will be a challenge
in the short term because of the availability of the skills and
knowledge. We are certainly concerned that at the moment there
is not clear enough direction about the timescales and about the
volume of work for many parts of the construction industry, particularly
the SMEs that we represent—which are of course the vast
majority of the companies that will take on this work—to
move forward on that. I will not get into the political difficulties
of how you deal with, if you do a street by street approach, those
who do not wish to co-operate with that process either because
they will not pay or they cannot pay.
Mr Berry: Yes. Building on that,
the Government has announced the Heat and Energy Saving Strategy
which is a forward step in achieving the retrofitting of our existing
housing stock, but the challenge is immense. We have 26 million
homes and 85 per cent of those will still be in use in 2050 (when
the Government has set the target to cut emissions by 80 per cent).
The next step is not the aspiration but the delivery: how the
incentives will be put in place, what measures will be put in
place to retrofit the existing housing stock, and then we have
to think about capacity in the construction sector. At the moment
there would not be sufficient capacity, even if there was a green
light to say: "Yes, go ahead. Do it now." We would have
to think about the matters of upskilling and training for builders
to do the work. It is a huge challenge. If we started now, it
would work out at about 24,000 homes per week to meet the Government's
target by 2030. We should not underestimate the task in hand.
At the same time, though, particularly as we are in a recession,
this is a brilliant opportunity for the construction sector to
tap into this market and bring about upskilling and new job opportunities
for particularly the small domestic builders that we represent.
Q317 Chairman: Are you saying that
you need more people to be recruited into the industry, or is
it that you have to retrain the existing labour force so that
it can carry out this work?
Mr Berry: It is both.
Mr Diment: It is a mixture of
both. The addition to the skills are probably not that extensive
once we are clear about exactly what needs to be done. Some of
the problems are around deciding exactly how you will do it. The
Government has a short-term strategy of making sure that decent
loft insulation and cavity walls are filled in all the properties
where it is practical to do so by 2015, and that is relatively
easy, but that will only start to tackle the problem. In many
older properties, for instance, you cannot put in cavity wall
insulation; you have to put something either on the inside of
the walls or the outside of the walls. Those are new skills not
a million miles away from the skills that the existing building
workforce has but it will involve some additional skilling. It
will involve probably more, if I can split the difference, on
the knowledge base, so that the builders who are doing the work
know what to recommend on individual properties. Work that we
have had done suggests that you can probably cover the vast majority
of properties in a dozen or maybe 15 different categories, so
you can have almost like an off-the-shelf approach for individual
householders. You will not cover them all. In addition to that,
we do have a problem at the moment in that a very large number
of skilled people in the construction industry are on the verge
of retirement/leaving the industry. We do not see, despite the
recession, bringing in enough new people to the industry to replace
those by the time the construction industry is hopefully working
again at a reasonable level of capacity—which we envisage
being still about three/four years away. There are some enormous
challenges, as my colleague said, if we are going to move to the
situation of dealing with something like 25,000 properties every
week for the next 20 years.
Q318 Chairman: Assuming people are
drawn back to work in the industry, are there adequate training
facilities for them to acquire the skills that they will need?
Mr Berry: We have a very good
working relationship with ConstructionSkills. We work with ConstructionSkills
to put on workshops to train our members in the saleability and
moving towards the low carbon economy. The problem at the moment
is the lack of demand. Our small builders tend to be more sceptical
because there is a lack of demand in the marketplace. But if the
strategy is underpinned by some milestones along the way to retrofit
our housing stock, we will see that willingness to do the work,
because obviously of the future job opportunities there. Yes,
there is capacity there to do it, but we need the certainty to
allow our members to tap into this potential market.
Q319 Colin Challen: Looking at the
retrofitting market, is there any evidence to show that it would
create jobs?
Mr Diment: I do not think that
there is any doubt at all that those jobs could be created. Research
we had done for us last year by the University of Oxford suggested
that you are looking at an additional market of something in the
order of £3.5 to £6.5 billion a year. That is a massive
market, both in jobs onsite but also in work that will be required
in the material supply industry, the production of the right sort
of materials. People are still really struggling with what are
the right things to do on these individual properties and in getting
those signals. A lot of R&D still needs to be done to work
out particularly how you tackle older properties, how you improve
the insulation of solid walls without having major detrimental
effects on the space within those homes. That could be a major
issue. If you tell people, "You are going to lose two or
three inches, and maybe even more, around each external wall in
your property" that is difficult to persuade people it is
worth doing. Our members are finding—and there are a number
of them now who have very good knowledge and information about
what can be done—is at the moment public opinion from many
people is still, "You're a builder, you're just trying to
make me spend more money on getting this work done than I really
want to spend." There is a question of knowledge and upskilling,
ensuring that the customer is being intelligent and that they
have the information, as well as training the builders and the
people who do the practical work.
Mr Berry: Also, we are in uncharted
territory. The technologies are being developed and some of them
are more effective than others, but that is part of the process
as we move towards a low carbon built environment. We should expect
that. Mistakes will be made, but we will learn from those mistakes
and improve the technology and bring the costs down as well as
the speed in terms of retrofitting.
Q320 Colin Challen: Our political
leaders have said over and over again that tackling climate change
is one of the ways of also tackling the recession. That is the
`opportunity speak'. Other people say that doing this is a big
burden. You have mentioned that householders balk at the price
of some of the things that may be implemented. What is your opinion?
Would those billions that you have spoken of improve our economic
position or simply make matters worse?
Mr Diment: In the short term it
would certainly help our industry. We have to find ways of making
it attractive, and incentivising particularly in the early part
of the programme, to get property owners to do that work. I know
there is some work going on—though we would argue not enough
and not fast enough—about ways you could put packages together
which would make it attractive for people to make that commitment
and on which there will be a relatively medium-term payback, but
I do not think we have the expertise to say that if you are looking
at this in an economy-wide setting it would be economically cost
effective. The problem we have is whether we can afford from the
environmental point of view not to be doing it.
Mr Berry: That is the point. We
now have a legal target to cut carbon emissions, and bearing in
mind that buildings contribute 40 per cent of the UK's total carbon
emissions, it becomes imperative to tackle the existing building
stock. There is that environmental imperative to do that and,
therefore, we need to look at how we upgrade our existing buildings
in the same way that the Government is tackling new build. It
has been quite ambitious in terms of new houses being zero carbon
by 2016, but we have not seen this same urgency in terms of our
existing buildings. That is where the requirement is and that
is where the future jobs and the new skills will be if the Government
is going to comply with the legal requirement.
Q321 Colin Challen: Hopefully this
will lead to a new green construction boom, but the last construction
boom which we experienced drew in an enormous number of, say,
Polish construction workers. Given what we have already heard
this morning, are British people, particularly in poorer areas,
going to be given the opportunity of getting involved in this?
What steps can we take to ensure that local people are going to
benefit from the boom that may take place this time around?
Mr Diment: We have to plan for
it properly. We know that over the last few years, and not just
because of the impact of the recession over the last 12 months
or so, we were starting to see, for the first time in a generation
a dramatic increase in the number of young people who wanted to
come into the construction industry, for instance. The frustration,
turning the clock back 12 months or so—or maybe a bit longer
than that, before the recession really started to bite—was
how many well-qualified young people were not able to get on places
in FEs or not able to get on apprenticeships because the funding
was not there. There is no shortage of people who want to come
into this industry and who want to work in the industry. We have
to work very quickly over the next few years to make sure that
they are given the skills, so that, using our home-based workforce,
we can rise to this challenge—which, as Brian said, is going
to be a massive one over the next 20 years or so. This is not
going to be a short-term boost; this is going to take at least
20 years to complete if we are going to get around 24 or 25 million
existing homes, most of which from an energy efficiency point
of view are pretty poor.
Mr Berry: Yes. There is no shortage
of people wanting to come into the construction industry. That
is the advantage of small building companies, because they are
taking on local people, and that is good for job creation right
across the country. The problem is that in a recession employers
find it increasingly hard to fork out the costs of taking on an
apprentice, and we are in danger of repeating the mistakes of
the last recession, when we lost hundreds of thousands of people
and we then had a skills gap when there was an upturn later on.
We need to be aware of that. People are talking about the possible
skills gap that could emerge when we come out of this recession.
It is vital that we do all we can to support employers to take
on the apprentices, so that when we do come out of it there will
be less of a skills gap than there might be.
Q322 Joan Walley: You have just mentioned
so many challenges. If we are looking at the Low Carbon Transition
Plan, with the sheer number of homes that need to be retrofitted—7
million homes altogether and 1.5 million homes to benefit from
the impetus to get solar energy into all this—how is that
going to be done in a fair way? How is it going to be done efficiently?
You have yourself said there are real issues in how this retrofitting
is going to be done. Have you been to the Centre for Alternative
Technology at Machynlleth? Have you seen the training and new
methods of construction that they are looking at? Is there any
scope for some kind of partnership between yourselves and them,
to look at how the modules of teaching these new construction
methods could be incorporated into the way your members build
in the future?
Mr Diment: It is very helpful
for you to remind me about that facility at Machynlleth. It is
many years since I have been there and I have not really thought
of that. We are talking to people like the big research establishments
and some of the university academic departments who are doing
work on this, networking through ConstructionSkills. The short
answer to your question is no, but you have made a very good suggestion
that we ought to be paying a visit up to Machynlleth and talking
to them there.
Q323 Joan Walley: Mr Challen was
asking whether the public are going to be prepared to take onboard
the costs of doing all this. How can you present the benefits
of this being done in terms of energy efficiency and also in terms
of cost savings? How can you link the work your members will be
doing with the benefits to individual householders? Do you have
any say in terms of the regional development agencies, as to how
their programmes could link in with this as well? There has to
be a mechanism, which does not apply at the moment to tick all
of these boxes, does there not?
Mr Diment: I take the point you
are making. We are fully engaged in using all our resources in
trying to help and put across the points that our members need
to know. We do try to talk to external bodies as best we can,
but part of the problem is that this is something which is so
important, so big, government has to take more of a lead on it.
There are some wonderful aspirations being expressed with the
strategies that have been published by government over the last
year or so, we are still unclear on the detailed road map for
moving forward.
Q324 Joan Walley: Government is taking
the lead, is it not, because it is about to announce the new CERT
programme? Presumably you are in some kind of talks with DECC
as to the shape of that CERT programme and how that would result
in jobs for your members in the retrofitting of properties.
Mr Berry: We have not had direct
contact with DECC on CERT. Most of our members are working for
private domestic clients and their main concern is the payback
period on energy efficient improvements. That is where there is
a lack of demand. That is where there is a reluctance for small
builders to upskill because of the absence of demand.
Q325 Joan Walley: That absence of
demand is going to change, is it not, when the CERT programme
comes in?—at least in certain areas.
Mr Berry: In certain areas, yes,
and we need to see more of that to kick-start that demand, so
that the building industry can respond to that demand and improve
the skill set that they have.
Q326 Martin Horwood: We have just
heard from the Energy and Utility Skills Council—and I do
not know if you were in on that part of the evidence session—that
the demand-led, industry-led approach to providing the skills
necessary for what is going to be a revolution in these trades
was going to be sufficient, but we have seen government research
that casts some doubt on this. I quoted an example of my own plumber
who had not even heard of combined heat and power, I could have
quoted examples of builders and architects who had no idea about
the new building materials that Ms Walley was talking about, who
did not really understand how solar technology could be incorporated.
How confident are you that the current demand-led approach to
filling the skills gap is going to succeed?
Mr Berry: We have this strategy
in place; we have the aspiration for all homes to be retrofitted
by 2030. That is a huge start, but we need this more detailed
map of how you are going to implement that. A range of incentives
to kick-start the market would help, and then you will find trade
associations such as ourselves can help by providing training
for our members. They will want to tap into that market. They
will see the opportunities there to carry out the retrofitting
work.
Q327 Martin Horwood: Are you sure
you are not going to hit a huge log-jam, where suddenly the incentives
are there and the demand starts to develop and you are sitting
waiting to develop the training programmes.
Mr Berry: Some householders do
want to green their homes as a statement, and there are firms
who do specialise. So it has started already, but we have a huge
way to go in making that widespread and improving the knowledge.
We have a role to play at the moment in alerting our members to
the opportunities that will become available and providing the
training with ConstructionSkills and the Energy Savings Trust
to alert our members about what skills will be required. They
are more aware than they were a couple of years ago. We launched
our Building a Greener Britain campaign two years ago. We carried
out research with Oxford University. We are having that debate
within the SME sector, but we do need those signals from government
that, "Yes, we have the aspiration. This is what we are going
to do in the next five years to retrofit and tap into that market"—which,
as was mentioned, is worth about £4 billion a year.
Q328 Martin Horwood: I have as much
fun as any other Opposition politician in knocking the Government,
but to be fair to them there are pretty strong signals coming
out of government now, are there not? Even if there were not,
there is a clear enough agenda around the skills necessary to
transform the building industry.
Mr Berry: The signals are out
there amongst opinion formers and politicians, but if you go on
to the street and talk to householders, they do not know about
it to the same degree. That is where the problem is. They are
not asking for these energy efficient improvements, and when they
do, they are worried about the extra costs and the payback periods—which
still have not been addressed because the technology is not available
yet to overcome some of those obstacles.
Q329 Martin Horwood: Are you saying
that the Government is giving some leadership but householders
just have not caught up with it yet?
Mr Berry: I think that is part
of it.
Mr Diment: There are always problems,
as we all know, with public information campaigns and getting
those messages across. We have seen so many, in health, education,
or whatever else. But our members are certainly saying to us,
"We are not finding the demand, as we talk to customers."
Q330 Martin Horwood: Are they going
to have the skills ready when the demand comes?
Mr Berry: It is the chicken and
the egg.
Mr Diment: Yes, it is the chicken
and the egg very much. Our members are SMEs generally at the small
end of that sector. We are talking about maybe family firms turning
over sub-£1 million a year. That is what the bulk of the
construction industry is: about 120,000 individual small firms
out there doing most of the work in the domestic sector. They
do not have at the moment the confidence that this is something
that is really going to happen and go out and make the investment
that is needed in training. We are trying to tell them that, but
some stronger noises are needed from government to make it absolutely
clear.
Q331 Martin Horwood: You say stronger
noises. The noises are pretty deafening.
Mr Diment: Well, specific action.
Q332 Martin Horwood: We talked before
about any specific incentives that would encourage people to go
and get the training for those skills into their small companies.
Mr Berry: We have to create that
demand.
Q333 Martin Horwood: We had a vague
answer from the skills council. Would you recommend any incentives
that would recommend people to get training before the demand
comes in?
Mr Diment: I know there is a danger,
as you say, of demand exceeding supply in the short term, but
just as important are some incentives in the short term to get
customers asking and wanting this done on their properties. That
is what we are not seeing at the moment. It has to be done from
both ends: incentives for the builders to make sure they and their
staff have the training and the knowledge they need but, equally,
some incentives in the short term to start customers wanting to
do this. At the moment, the evidence we are getting back from
our members is that that demand is very, very light and patchy.
Q334 Martin Horwood: We have Warm
Front. We have the Low Carbon Buildings Programme—problematic
as that has been. We have CERT coming in. You would ramp all that
up by a large margin, would you?
Mr Berry: In the private sector
one of the campaigns we have had for a long time is reducing VAT
to 5 per cent for energy efficient repair maintenance. That would
really help kick-start the retrofitting market. We need that sort
of incentive at the beginning of this process to bring back the
sea change that is required to meet those government targets to
cut carbon emissions and retrofit our housing stock. Once you
have that, then you can start thinking about bringing in a form
of regulation at a later period. You need to kick-start the market
first by either reducing VAT or a council tax rebate, so that
everyone will buy into the process. The problem at the moment
is that people are sceptical, with the recession, and they do
not want to pay any additional costs, and the builders are reluctant
to add on costs to clients at a time when they are trying to win
work.
Q335 Martin Horwood: Coming from
a flood-prone constituency, can I ask you about adaptation. There
seem to be some challenges on that front as well, apart from the
low carbon side. The adaptive technology for climate change also
seems a bit mixed. When my constituents have tried to look into
flood proofing ground floors and the changes that they might need,
it all seems rather ad hoc and experimental. Do you think the
skills are going to be there for adaptation?
Mr Berry: I am sure, as our climate
changes, that will be a market that our builders will need to
tap into, but the technology is being developed and the skills
are being developed, so we are at the beginning of the process.
Q336 Martin Horwood: Have you as
an industry done any work on adaptive technology that you can
tell us about?
Mr Berry: Not as a trade association.
We have not done any research on adaptive technology, no.
Q337 Dr Turner: It seems to me that
there is a need for a certain education process, both for customers
and the bulk of your members, the thousands of small jobbing builders
who at the moment provide traditional skills at best, and not
always those to any satisfactory degree. Are your members in a
position themselves to know what they want from the training market
in order to demand training? Even assuming that the market gets
the drivers that it needs to get it moving, are the skills going
to be there either in the clients or in the building firms and
their employees? What role do you propose to play in order to
fill that linking gap?
Mr Diment: There is certainly
a lot of education that still needs to be done. We are obviously
concentrating on our members. We do not really have access to
the clients, as such. We are trying to put out material to them.
We are running training courses. We are putting articles in our
magazines. We are putting material on our website that our members
can use. It is trying to persuade them—and I would preface
that with the comment that my experience of dealing with them
is that they are pretty entrepreneurial. These are people who
run small businesses, many of which have run for several generations
quite successfully, so if they can see an opportunity they will
run with it. At the moment they are still very sceptical that
this is a market that is really going to take off in their relatively
short-time horizons. As you will know from the small businesses
you deal with in your constituencies, I am sure, these are the
sort of people for whom this week's income pays next week's bills.
Their long-term planning horizons are few and far between. It
is about: "Am I going to keep the business ticking over for
the next three to six months?" We have some work to do. We
readily accept we have to make them look at the longer-term time
horizons, but in the current circumstances that is difficult unless
they can be absolutely confident that that work is going to be
coming through in sufficient quantities to have a real impact
on the success of their business. They are not prepared to make
that commitment at the moment. They still keep on telling us they
are not totally convinced of that.
Q338 Dr Turner: How do you think
the Government can help with this communication problem?
Mr Diment: Government has to find
a way of really kick-starting this programme and getting it into
the sort of markets that most of our members are dealing with.
They do some work in social housing, some work for private landlords,
but the bulk of their clients are individual owner-occupiers who
probably in the vast majority of cases would not be eligible for
many of the schemes that are currently on offer. That is certainly
one of the concerns. Of course, when this programme really gets
moving the vast majority of the property occupiers who are affected
are going to be owner-occupiers, and that is where the programme
does not seem to have moved forward at the moment.
Mr Berry: That is where, repeating
what we were saying earlier, there is a need for incentives for
householders to invest in their homes which would create the work
for small builders and result in the upskilling.
Q339 Martin Horwood: There is a gap.
Mr Diment: Yes.
Q340 Martin Horwood: I want to come
back on Mr Challen's earlier questions about whether or not we
need planning for these skills. You seem to be saying that, given
the right market signals, the sector will respond in the right
way and we will almost create the training in the wake of those
market signals. Do we need the Energy & Utility Skills Council
to keep working on its renewable energy strategy at all? Is that
all going to flow naturally from the market signals if we get
those right?
Mr Berry: I am sure there is a
need there, but builders are entrepreneurial, they will respond
to market signals. There is a role there for the FMB in providing
the training and link-up with ConstructionSkills and the Energy
Savings Trust, and there is also a role for the media. The media
has a role in terms of alerting the public about what they can
do to improve their homes. An emphasis there in getting the messages
in to every household would help. But it is a collective effort.
It is not one or the other; it is the need to bring about a cultural
change in how we see our homes and what can be done to improve
them.
Q341 Martin Horwood: I suppose it
is the timing we are worried about here. Without that forward
planning, I cannot see quite how that market response to is going
to come anywhere near fast enough to set up the training and to
promote the courses that are going to be necessary to get those
skills in.
Mr Berry: The timing is an issue.
That is why we need to map out the timescale over the next 20
years about how you are going to tackle the problem of retrofitting
and what that means. More work needs to be done so that we have
greater clarity about where we can put the training into progress.
Q342 Chairman: Does the Government
need to do more to encourage managers in the building industry
to think about how they should re-skill the workforce?
Mr Diment: It probably does. Through
ConstructionSkills there is quite an extensive programme for managerial
training. I am not sure that covers as much detail as it could
do about how you spot the training need and how you identify the
new skills that are coming through. The problem the industry is
facing, certainly in the short term, is a dearth of resources
for training, even in its current reduced state. ConstructionSkills,
the sector skills council for the construction industry, has virtually
over the last two years had to eliminate its reserves to manage
the amount of training that is required. There are some real challenges
there in the short term about where the resources for that training
will come from.
Q343 Chairman: You mentioned in your
earlier answer about the understandable tendency, particularly
for SMEs, to focus on the paying of immediate bills. Do you think
more could be done to get management in this industry to think
about sustainability? Are there some more general green skills
which management needs, to think about running their businesses
in a more sustainable way?
Mr Diment: I am sure there are.
Our members are particularly at the very small end of the SME
market, in which the manager is everything in the business as
well as probably being hands on for 40 or 50 hours a week onsite,
so it is a real challenge for these people to get their minds
around or even to manage their time in such a way that they can
get all these skills across. They are anxious to learn but have
great demands in trying to balance and keep the business afloat.
At the moment the absolute priority is, "How do I make sure
I have some work next week, so that I can pay the guys and keep
a roof over my own head?"
Q344 Chairman: I am sure what you
have described is familiar to all of us. There are plenty of people
doing high quality work in exactly that scenario, not quite hand-to-mouth
but in a somewhat day-to-day fashion. Given that is the sort of
characteristic, is there any way of providing more management
skills? It is difficult to see how firms operating in the way
you have just analysed will ever have the capacity or the resource
or the time to think about management skills, quite apart from
workforce skills, in a sustainability context.
Mr Berry: In terms of their training,
you have to be very practical, to see where the market opportunities
are. It cannot be blue sky thinking about saving the planet; it
has to be, "Yes, green means business. It means increasing
my profits." That is when it will start to take shape.
Chairman: I think we are probably through.
Thank you very much for coming in.
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