Chapter 1: Introduction
The construction sector and background to the inquiry
1.In his 2016 report The Farmer Review of the UK Construction Labour Model: Modernise or Die,1 Mark Farmer, Chief Executive of Cast Consultancy, delivered a stark warning to the Government and the construction sector about the future of the industry:
“The evidence reviewed indicates that the construction industry and its labour model is at a critical crossroads in terms of its long-term health. Whilst the diagnosis points to a deep-seated market failure, there are certain industry trends and wider societal changes happening now that represent both unprecedented risk and opportunity for the industry and its clients. If the opportunities are not harnessed, the risks may become overwhelming.”2
The report, commissioned by the Government through the Construction Leadership Council (CLC), identified a range of problems with the construction sector, including:
- Low productivity
- Low predictability
- Structural fragmentation
- Leadership fragmentation
- Low margins, adversarial pricing models and financial fragility
- A dysfunctional training funding and delivery model
- An ageing workforce
- Lack of collaboration and improvement culture
- Lack of R&D and investment in innovation
- Poor industry image.3
One of the report’s key recommendations was that the Government should promote “the use of pre-manufactured solutions through policy measures”.4
2.In its response, the Government said it would incorporate the recommendations into future policy development, but it also put the onus on the construction sector to “up its game on skills, embrace new and more productive ways of working, ensure the quality of design and workmanship and be more innovative”.5
3.Following this, the Infrastructure and Projects Authority (IPA) published its report, Transforming Infrastructure Performance,6 in December 2017. It acknowledged that “the construction sector faces issues such as low profit margins and lagging productivity compared to other sectors of the economy”7 and committed to tackling this in several ways, including “accelerating the use of modern methods of construction like offsite manufacturing”.8
4.As part of the Government’s Industrial Strategy White Paper, Industrial Strategy: building a Britain fit for the future,9 published in November 2017, the Secretary of State for Business, Energy and the Industrial Strategy announced the Construction Sector Deal. The Government outlined four key objectives for the proposed Sector Deal:
- 33% reduction in the cost of construction and the whole life cost of assets;
- 50% reduction in the time taken from beginning-to-end of new build and refurbished assets;
- 50% reduction in greenhouse gas emissions in the built environment; and
- 50% reduction in the trade gap between total exports and total imports of construction products and materials.10
These were the same targets that were set out in the Government’s Construction 2025: Strategy,11 published in July 2013.
5.The Government published the Construction Sector Deal on 5 July 2018. It set out three strategic areas of focus to meet the objectives outlined above:
- Digital techniques deployed at all phases of design to deliver better, more certain results during the construction and operation of buildings;
- Offsite manufacturing technologies to help to minimise the wastage, inefficiencies and delays that affect onsite construction, and enable production to happen in parallel with site preparation;
- Whole life asset performance to shift focus from the costs of construction to the costs of a building across its life cycle, particularly its use of energy.12
6.The Government has announced several other initiatives for the construction sector, including:
- £170 million of government investment from the Industrial Strategy Challenge Fund to the ‘Transforming Construction’ programme over three years.
- The Centre for Digital Built Britain at the University of Cambridge to develop Building Information Modelling (BIM), sensors, data analytics and smart systems technologies that can be embedded in new building and infrastructure projects.
- Investing £1.4 million in the Building for 2050 research project, which gathers evidence from three housing developments in Swansea, Bristol and Manchester with the aim of uncovering the barriers to developing low-cost, low-carbon housing.
- Providing up to £72 million to invest in establishing a core innovation hub to support collaboration between industry and academia and transform the construction sector.
7.Additionally, in the Autumn Budget 2017, the Chancellor of the Exchequer made the following commitment:
“Building on progress made to date, the Department for Transport, the Department of Health, the Department for Education, the Ministry of Justice, and the Ministry of Defence will adopt a presumption in favour of offsite construction by 2019 across suitable capital programmes, where it represents best value for money.”13
8.So far, the take up of off-site manufacture across the construction sector has varied in different parts of the sector, partly because off-site methods will not be appropriate for every type of construction project.
Our inquiry
9.In this inquiry we considered whether manufacturing buildings and infrastructure (or components of them) off-site could improve productivity in the construction sector. We examined the potential benefits and drawbacks of the wider uptake of off-site manufacture, as well as how Government policy, particularly around public procurement, might need to change to facilitate it. We also considered what actions the construction sector could take to drive further use of off-site techniques.
10.We held 10 oral evidence sessions and received 81 written submissions. We are grateful to all those who gave evidence.14
11.The Committee visited Laing O’Rourke’s Explore Industrial Park on 22 May 2018. This was a valuable experience and we thank Laing O’Rourke for facilitating our visit. Further details of the visit are in Appendix 6.
12.We are grateful to our specialist adviser, Mike Putnam15, for his expertise and enthusiasm. We are also grateful to the Committee staff who worked on the inquiry: Donna Davidson (Clerk), Dr Daniel Rathbone (Policy Analyst), Cerise Burnett-Stuart (Committee Assistant), and Anna Murphy (former Clerk).
Structure of this report
13.Chapter 2 looks at the broad range of activities that come under the definition of off-site manufacture for construction, and considers the case for increasing the use of these methods. Chapter 3 explores off-site construction as it applies to economic infrastructure, buildings and housing, and includes several case studies. Chapter 4 considers the difference in skills needed for off-site manufacture and the changes in training that would be required for off-site manufacture to be implemented on a larger scale. Chapter 5 examines the barriers faced by the construction sector in using off-site manufacture and makes recommendations to the sector based on these. Finally, Chapter 6 explores actions that can be taken by the Government and recommends how further progress can be made.
1 Mark Farmer, The Farmer Review of the UK Construction Labour Model: Modernise or Die (October 2016): http://www.constructionleadershipcouncil.co.uk/wp-content/uploads/2016/10/Farmer-Review.pdf [accessed 14 June 2018]
2 Ibid., p 8
3 Ibid., p 7
4 Ibid., p 64
5 Department for Business, Energy and Industrial Strategy, Government response to Modernise or Die (19 July 2017): http://www.constructionleadershipcouncil.co.uk/wp-content/uploads/2017/07/Government-Response-to-the-Farmer-Review_19-July-2017.pdf [accessed 20 June 2018]
6 Infrastructure and Projects Authority (IPA), Transforming Infrastructure Performance (December 2017): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/664920/transforming_infrastructure_performance_web.pdf [accessed 14 June 2018]
7 Ibid., p 4
8 Ibid. See also World Economic Forum, Shaping the Future of Construction A Breakthrough in Mindset and Technology (May 2016): http://www3.weforum.org/docs/WEF_Shaping_the_Future_of_Construction_full_report_.pdf [accessed 21 June 2018] and McKinsey, Reinventing Construction: a route to higher productivity (February 2017): https://www.mckinsey.com/~/media/McKinsey/Industries/Capital%20Projects%20and%20Infrastructure/Our%20Insights/Reinventing%20construction%20through%20a%20productivity%20revolution/MGI-Reinventing-construction-A-route-to-higher-productivity-Full-report.ashx [accessed 21 June 2018].
9 Department for Business, Energy and Industrial Strategy, Industrial Strategy: Building a Britain fit for the future, Cm 9528, 27 November 2017: https://www.gov.uk/government/publications/industrial-strategy-building-a-britain-fit-for-the-future [accessed 11 June 2018]
10 ‘Government and industry cement deal to give UK construction the edge’, Department for Business, Energy and Industrial Strategy, (29 November 2017): https://www.gov.uk/government/news/government-and-industry-cement-deal-to-give-uk-construction-the-edge [accessed 11 June 2018]
11 HM Government, Construction 2025 (July 2013) p 5: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210099/bis-13-955-construction-2025-industrial-strategy.pdf [accessed 20 June 2018]
12 Department for Business, Energy and Industrial Strategy, Construction Sector Deal (5 July 2018): https://www.gov.uk/government/publications/construction-sector-deal/construction-sector-deal [accessed 5 July 2018]
13 HM Treasury, Autumn Budget 2017 (22 November 2017): https://www.gov.uk/government/publications/autumn-budget-2017-documents/autumn-budget-2017 [accessed 14 June 2018]
14 All written and oral evidence is online, see House of Lords Science and Technology Select Committee, ‘Off-site manufacture for construction inquiry’: https://www.parliament.uk/off-site-manufacture-construction [accessed 10 July 2018]
15 Mike Putnam’s registered interests are included in Appendix 1.