Decarbonisation is a bit like “you’re on mute” – it’s not so long ago that we barely heard the term, but now it has become part of the everyday lexicon of modern usage, especially in construction.

But amongst all the talk, a report published recently by the Green Construction Board for the Construction Leadership Council (CLC) identified that the current rate of progress will not achieve net zero carbon in our infrastructure by the target date of 2050.

The report measured progress since the Infrastructure Carbon Review of 2013, highlighting that infrastructure is responsible for more than half of the national carbon footprint. There’s no doubt that significant progress has been made, but the construction sector has not yet fully embraced the ideology that cutting carbon can also cut cost.

The traditional procurement and commercial solutions that continue to incentivise lowest capital cost are cited as holding back progress for meaningful decarbonisation delivery. It’s no coincidence that these are the same issues that have blighted productivity in the construction sector for years.

The poor productivity that comes with operating on small margins significantly limits innovation across the sector, disincentivising companies from investing in research and development.

The Construction Sector Playbook promises to bring a collaborative, value-driven approach, which is also among the report’s recommendations for achieving net zero by 2050. It aims to improve productivity and so should create the levers for increased innovation.

The PAS 2080 specification for managing infrastructure carbon created a framework for the industry to realise the benefits of decarbonisation, but the CLC suggests that few organisations have embedded the principles into their investment decision-making, with much more leadership on collaboration needed.

The construction sector needs to rapidly pick up the pace of change to reach decarbonisation targets now. The tools are all there and there is certainly no lack of desire. Aura’s own decarbonisation experts are currently helping Newcastle City Council to achieve net zero targets in schools.  Further proof is in the many examples of innovation around the country where companies have developed carbon neutral infrastructure solutions with significant cost savings, or at no additional cost. These have been particularly prevalent in offsite and other modern methods of construction.

The speed of uptake is only likely to get a much needed boost once more clients and contractors understand that net zero is not an expensive overhead but a real opportunity to cut costs and improve productivity while protecting our environment.

At Aura, our decarbonisation team offers a full turnkey decarbonisation service to the public sector, from support in securing funding under the Public Sector Decarbonisation Scheme through design and project management, to construction and completion.

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The traditional reliance on subcontracting in the construction sector is about to change when HMRC introduces new IR35 employment tax changes this April.

Postponed by a year because of COVID 19, the new rules are designed to remove the tax benefits for contractors working as disguised employees. The legislation shifts the responsibility for determining tax status away from the contractor and onto the business engaging their services. If IR35 applies to the contractor then they must be taxed as an employee under PAYE.

The impact for construction will be significant and most companies in the sector still have no plans to deal with IR35, despite the extra year’s delay. A series of HMRC webinars in January, designed to inform about the pending tax changes, was fully booked within just a few hours of being announced.

HMRC estimates that only around 10% of contractors in construction comply with IR35 rules, which means 90% of contractors in the sector could be affected by the change, reducing their profits by 20%. It’s even harsher for the employer, with potentially up to 37% higher NI contributions for a contractor moving onto their payroll and taking home the same pay.

IR35 was originally introduced for public sector organisations in 2017. The following year almost half of the public sector contractors increased their day rates by 20% to balance the additional cost.

Employers face the risk of hefty fines for non-compliance and any business deemed not to have taken appropriate care to determine IR35 status for every individual engaged via a personal service company will increase their chances of being penalised.

While costs increased, the experience in the public sector suggests that recent prophecies of contractors’ demise may be premature. Similar fears were expressed in 2017, but the reality was that around 89% of public contractors eventually passed IR35 assessments once employers fully understood how to properly undertake the process.

The construction sector needs to heed the lessons from the public sector and use the few weeks left until 6 April to learn the rules and assessment criteria for IR35.

There is more information available at:

https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

The UK has been a global leader in the implementation of PFI, with more than 716 projects established since the early 1990s, with a range of operating periods from 15-25 years.

To date, only 19 projects have achieved handback, equating to 2.6% of the market which puts into perspective the scale of the PFI handback ‘operation’ that awaits as we move forward within this decade.

England has the monopoly of the PFI market at 76% which in monetary terms equates to £42,017.60M of the overall PFI capital spend.  Scotland have received £5,829.50M across 12% of the PFI market.  Interestingly, there is a greater spend per head in Scotland than in England.

Early contracts are heavily impacted by poorly defined handback arrangements which will affect the handback process and quality of the asset.  One aspect that needs consideration is whether there are sufficient funds remaining in the lifecycle funds.

The hare will race through handback returning the building and the staff to the public sector. The tortoise will consider the opportunity that handback presents and carefully craft an outcome that reflects strategic direction as well as contractual and commercial compliance.

The Construction Playbook has been roundly welcomed by the UK construction sector and recognised as an opportunity to transform the industry.

It is designed to eliminate the “race to the bottom culture” of lowest bid wins identified in the post-Grenfell Hackitt Report, setting out key policies for the public sector to achieve a collaborative approach to procurement with a focus on whole life cost, productivity and modern methods of construction (MMC).

The Playbook is a powerful framework for change and supports recovery from COVID 19. It is mandatory for all central government and arm’s length businesses, setting the benchmark for the Prime Minister’s promise to “build, build, build” with £37 billion of social and economic contracts in the next year.

The focus on value is music to the ears of an industry that has struggled with poor productivity and low margins for decades.  A mandate for the increased use of MMC will improve efficiency and certainly meet the “build back greener faster” ambitions.

A huge amount of collaborative work has gone into developing the Playbook, but the real challenge is in implementation. The term ‘playbook’ comes from the world of sport and any coach will tell you that even the best playbook strategies are meaningless unless properly executed on the field of play.

The proof in this pudding comes down to implementation. It will require training for many public procurement professionals, underscored by a strong communications campaign from Government.

We’ve been here a few times before over the years. The Construction Sector Deal was announced in 2018 but there has been little data available since then to measure its success. The Playbook puts MMC at the heart of the new drive for value. In 2017 the Government announced the presumption of offsite across five departments but very few projects were delivered using those methods. The slow uptake was attributed to a lack of understanding by public sector procurement teams.

Mandating a methodology is one thing, delivering the desired outcomes is quite another but the Cabinet Office has pledged to monitor the implementation of the new policies to achieve success.

The Construction Playbook is a potential game-changer that will transform buildings in the UK if rolled out effectively.  As always, actions will speak loudest in making it successful.

Cybercriminals have recognised the potential for rich pickings in the construction sector as it continues to expand the use of digital solutions and automation.

Within four months this year, four major UK contractors were the victims of sophisticated malicious attacks targeting their systems.

As construction embraces digitalisation and automation, the risks from costly and damaging cyber attacks rise exponentially. Last year, almost half (46%) of UK businesses experienced a cyber security breach, with that figure rising to 68% for medium companies and 75% for large firms.

There’s no doubt that construction is investing more in cyber security than ever before, but companies need to understand that effective protection is reliant on a security culture across the entire business, not just the technical protection that IT teams have installed.  Over 80% of successful cyber attacks are from phishing, whereas the incidence of virus or malware attempts has dropped significantly in recent years to around 15%. Phishing relies on human error or misjudgement, its crucial staff are aware of the risks and work in a culture that operates best practice for password security and information sharing.

Construction companies must also look beyond their own teams to ensure that a cyber secure culture runs throughout their supply chain partnerships. The use of shared digital platforms and software solutions across project delivery means that your business is only as secure as the weakest link in the supply chain.

Large public sector infrastructure projects are increasingly demanding evidence of robust cyber security arrangements and corporate policies. The Government backed Cyber Essentials certification is mandatory for most public contracts as reassurance that appropriate basic measures have been put in place to protect from cyber attack.

The onward march of automation presents another opportunity for cybercriminals. Any machinery that has to connect to a network and is part of the ‘internet of things’ becomes a potential door into corporate servers and all the data that resides there.

The industry needs to collaborate on cyber threat and share experience and information to mitigate the risk for everyone. In the analogue age, we used to say that car thieves were so good that they could crack a new car alarm within hours of it coming to market.   In this digital age, the best way to keep up is by instilling a cyber secure culture across the organisation and it’s supply chain partners to mitigate the risk.

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.