The announcements on new vaccines have given hope to every business that in a few months we will have come through the worst of the pandemics’ damage to the economy. But the impact of Brexit that’s just a few weeks away will create more challenges for which unfortunately there is no vaccine available.
The pandemic has shown how the construction sector can adapt quickly when it needs to, but the challenge with Brexit is that we know change is coming but there’s still no clarity about what it will be.
The ‘oven-ready’ deal seems to have been left in the fridge. The Prime Minister says he’s prepared to walk away from a deal and key deadlines continue to come and go with no more indication of what the likely outcome is.
Without certainty, planning will only ever be a ‘best estimate’. Construction needs certainty, and soon.
More than 60% of materials imported by the UK construction industry comes from the EU. These products are not currently subject to any tariffs. If the UK reverts to World Trade Organisation (WTO) rules there will be tariffs along with border checks, which will increase costs and potentially cause delays as materials are held up at the border.
There are additional challenges in terms of product standards and quality assurance recognition. The new UKCA marking is due to be introduced in 2021 and will apply to most goods currently subject to CE marking. It can be used from January 2021 but CE marking can still be used for a twelve month transition period up to 1 January 2022. CE marking will only remain valid after that where UK and EU rules remain the same or if the EU changes its rules. The UKCA marking will not be recognised in the EU. This means potentially that manufacturers will have to pay twice for test certifications to meet the two schemes which would increase costs.
In a sector that relies heavily on immigrant labour, the loss of free movement will exacerbate the skills shortage that construction has endured for so long. Yes, it’s possible that skills training initiatives can eventually close the gap, but that will take time and in the meantime labour costs will be driven higher.
Whether there is a deal or not, the prediction is that the UK economy will suffer from the impact of Brexit, so we need to plan to soften the blow. The Government has invested millions creating information campaigns for businesses to prepare, but the answers are still vague because no one knows exactly what to prepare for. The uncertainty has become a greater risk than Brexit itself.
With a new safety regime for 2023 on the horizon for construction, boardrooms are being warned to start the process of change within their organisations now or risk harsh penalties.
The advice came from Dame Judith Hackitt, the author of recommendations for the construction industry in her report following the Grenfell fire of 2017. Speaking at the recent Construction Leader’s Summit, she said: “Any part of this sector that thinks they can survive by standing still or defending their current territory is sadly mistaken. The place to be starting this is in the boardrooms and I think that in every organisation if that conversation hasn’t already started, it should.”
The government’s Building Safety Bill is currently working its way through Parliament after the draft was published in the summer. It sets out details of new legislation for building regulations designed to prevent another Grenfell fire.
The appointment of a new Building Safety Regulator is a key component of the bill, along with a framework of competence for anyone designing, building or inspecting a high rise residential building.
The bill has been broadly welcomed by organisations across the industry, including the Chartered Institute of Building, Construction Products Association and RICS.
For many companies managing their operations through a pandemic crisis, the temptation will likely be that 2023 is a long way off with plenty of time to look at compliance. But what the entire sector needs to understand is that the bill will force a fundamental systemic change that will require much more collaboration throughout the supply chain. It will take time and some bravery to move away from lowest bid wins to a more value oriented procurement approach. Many of the procurement processes currently in operation will not survive once the new laws come into operation.
Once again, construction has an opportunity to seize the moment and overcome the lack of inertia in procurement. The design and build model as we know it faces real challenge so needs to shift the value judgements and is till a collaborative culture throughout the supply chain.
The Chartered Institute of Building describes the bill as the “once in a generation opportunity for change”. The question is whether the industry recognises this and acts now to avoid the risk of waiting until the deadline and paying a heavy price in the future.
Construction has always been among the slowest sectors to invest in artificial intelligence (AI), but a renewed shift towards accelerating innovation, driven by the impact of COVID-19, may see that change.
AI automates human tasks, improving productivity, efficiency and consistency and reducing the potential for human error.
The adoption of BIM and project management software systems has increased significantly over recent years. Some solutions that use machine learning to specifically create 3D models of mechanical, electrical and plumbing systems that do not clash with building architecture and will show an optimal model for each iteration.
Large scale projects require the coordination of many complicated tasks and moving parts and would be difficult to control without the assistance of technology. The consequences of a small mistake can be huge. The root cause of the issues that delayed the opening of the £150 million Edinburgh Royal Hospital for Sick Children was recently identified in a review as ‘human error’ in copying data to a spreadsheet.
The technology is developing at a pace that far outstrips take up in construction. Robots can now produce the structural elements of a building for assembly on site and there are machines capable of laying bricks consistently and accurately at many times the speed of a skilled bricklayer.
The use of drones for site survey has become increasingly common. Imagine a future where drones could identify automatically whether workers are wearing the correct PPE or flag up areas on site that are likely to flood based on predicted weather patterns? If this seems fanciful, remember that the military has been operating drones to surveil and destroy enemy positions from thousands of miles away.
The rollout of 5G mobile data networks is potentially one of the biggest game changers for the growth of AI. It increases the capacity for data collection and analysis that will enhance the application of automated technology. With fast reliable networks, the Internet Of Things can be used with AI to monitor conditions onsite, identifying anything that is missed, assess productivity and forecast late completion or budget overruns.
Artificial Intelligence, robotics and the Internet of Things could reduce building costs by up to 20% in a sector that has resolutely failed to improve productivity for decades. It’s unlikely to replace the human workforce, but it would change construction by reducing expensive errors and improving safety and efficiency.
The Government is determined that the UK must ‘Build Back Better’ to drive post pandemic economic recovery. The rapid integration of AI will play a significant role in achieving that ambition.
The latest data from industry analysts Barbour ABI indicates the continued ‘V’ shaped recovery in construction with an 80.3% increase in the number of contract awards in July.
This is an increase in total value from £3.1bn in June to £6.3bn with residential and infrastructure accounting for 50% of the share of total contract awards.
The upturn is certainly sharper than most in the sector predicted and there is clear momentum from three consecutive months of growth. However, it’s still too early to predict with any certainty how steep or how long the incline will be.
The Government’s ‘build, build, build’ strategy puts construction at the centre of its plans for economic recovery, hoping to repeat the success of a similar approach in the wake of the second world war.
The question is whether the uncertainty of the wider economic outlook will put the brakes on the early momentum we are currently seeing.
The Construction Products Association predicts that output in the sector will fall by 20.6% in 2020 with doubts about longer term demand. It identifies a fragility in long term confidence for new housing developments with the prospect of unemployment and signs of lender appetite worsening. Consumer confidence is impacting the commercial sector with shifts to e-commerce and homeworking that affect retail and city centre office development.
There are still huge unknowns around the impact of Brexit. The current negotiations show no sign of progress and the clock is ticking down towards the October deadline that the EU requires to ratify agreements with its 27 members by the end of the year.
Let’s not forget the potential for a second wave of infections in the autumn that could send the country back into lockdown and instantly reverse construction’s gains from the last three months.
Last year the construction sector’s output of £413bn was equivalent to 8.6% of GDP. It employs more than three million people. Continued growth in construction is crucial to the UK’s economy but there are still some significant potholes along the road to recovery.
The lack of diversity in construction has been a problem for many years, yet the pace of change remains slow. The sector has challenged itself to adopt a more unified approach to achieve faster progress in tackling the issue.
The UK workforce is more diverse than it has ever been with ethnic minorities making up 12% of the working age population. But research shows that the construction workforce is around 3% black, Asian, minority ethnic (BAME). The proportion of women has been static at 13% for some time after reaching a peak of 19% in recent years.
Construction knows it has a lot to do and every professional body within the industry promotes diversity and inclusion as a high priority . The sector is not consciously discriminatory but a survey by Hay last year suggests that perhaps there is an element of unconscious bias. It identified that 78% of black workers feel their career progression opportunities are limited because of discrimination, compared to 41% of white employees. Only 32% of BAME workers believed their voice is heard and respected at their company, compared to 43% of all employees.
Employers and industry bodies are working hard to tackle the issues. Earlier this year, the Building and Engineering Services Association called on the government to create a strategy for diversity in the construction and engineering sectors. That may be a way to bring the industry together and encourage more women and people from BAME backgrounds to take up careers in the industry.
There is also a role for stronger leadership to promote the issue. The loudest voices in the industry are usually from champions of the cause who are themselves women or identify as BAME. We need to see more white, male CEO’s speaking up as the champions of change.
While there is an absolute moral imperative to improve diversity, research shows that it could also a be a key driver for innovation in the sector. A McKinsey report on diversity shows that gender-diverse companies are more likely to perform better than non-diverse companies, with ethnically diverse companies 35% more likely to perform better. The more varied a group’s collective experiences and background are, the wider their knowledge base will become.
The lack of diversity is not news to anyone in construction, but successful improvement will depend on collective will and industry leaders working together to act on it.
The Committee on Climate Change (CCC), which provides independent advice to Government on preparing climate change, recently called for ministers to seize the opportunity of a post coronavirus plan to make construction greener as it recovers.
A couple of weeks later the Government announced its £3bn green investment package to support 140,00 jobs. £2bn will go towards Green Home Grants for homeowners and landlords to insulate properties. A further £1bn will be used to improve energy efficiency in public sector buildings.
While the announcement was welcomed across the industry, there are still some reservations that the devil is in the unannounced detail. For example, the £1bn for public buildings is only for one year and there is doubt that government departments and local authorities will have time to resource this effectively.
In July, the Institution of Civil Engineers published its report, State of the Nation 2020 Infrastructure and the net-zero target. ICE President, Paul Sheffield cautions in his foreword that the industry needs to remain focused on climate change and the 2050 target.
The report makes several recommendations and highlights that the infrastructure we deliver today needs to be consistent with a net zero target that may sound deceptively distant to some. It identifies the economic response to the COVID-19 pandemic as a unique opportunity for the UK to recalibrate its approach and rebuild the economy around the net-zero target.
The Government was quick to remove the barriers to innovation new thinking in its efforts to inspire the innovation that built Nightingale hospitals in a matter of weeks. The sector needs to maintain that momentum and use the Construction Sector Deal to drive innovation that achieves sustainable solutions using modern methods. That also means ridding construction of the insidious “lowest price’ culture in procurement and focusing on added value and whole life cost.
With construction directly influencing almost half of the UK’s carbon emissions and two thirds of its waste, achieving success in the sector is critical to the nation. How long can a sector that knows what needs to be done keep repeating the mistakes of the past?
Anyone who has any doubts about the chances of success in achieving zero-carbon should hop on a plane to Copenhagen, a city that adopted a plan in 2009 and will be carbon neutral by 2025.