Declining resilience a long-term threat to industry

An urgent need to improve productivity has been highlighted by the long-term decline in resilience in the UK construction industry exposed by the pressures of Brexit and Covid, Cast Consultancy CEO Mark Farmer told delegates at the GIRI members’ meeting in November.

Headline issues such as workforce attrition, material supply chain fragility, and ESG-driven investment and lending are compounding existing problems in the way the industry operates, he said, and factors such as building safety legislation and the decarbonisation agenda – while important and necessary – will amplify these challenges.

Neither the building nor the infrastructure sector has taken the lead in efforts to improve resilience. in residential construction, Mark said: “some of what has been happening is pretty shocking and the consumer is fighting back. It goes to the heart of brand and reputational risk that is starting to bite big companies.”

In infrastructure, he added: “Major projects are heavily risk laden, but just accepting that risk is not necessarily a way forward. We need to look at how we de-risk, and how we mitigate.”

However he warned that two of the key areas that have been highlighted by the Grenfell inquiry and the Hackitt Report – culture and competence – should not be conflated. “For me, the two are linked, but they are very different, and they represent the double challenge facing the industry. There has been a lot of talk about addressing culture, but technical competence and capability is also part of this.”

While Brexit and Covid might have accelerated the impact of declining resilience, underlying issues predate both. “The symptoms of failure are not just qualitative but are also present at a business organisation level. 

“The fact that businesses are struggling to hold risk on project outcomes, together with the industry’s favoured lump-sum contracting model means that the risk of projects, particularly more complex or labour intensive ones, has only gone up. The impact of Brexit and Covid around price volatility and material availability has amplified some of these issues. and even though we have gone through a period of significant growth in the last five years, businesses are still losing money. We will see an acceleration of insolvency because of that inability to hold risk.”

The two most relevant issues are resource scarcity and declining resiliency. “If you put materials to one side, the human capital element of the industry is a major, long-term trended risk, amplified by the fact that this is a very low productivity industry and we are hugely reliant on labour that we are potentially going to have less of in the future.”

The industry is struggling with recruitment, evidenced by the fact that employment in the UK construction industry never reached the level it was at before the 2008 financial crisis. “Specific issues are compounding this problem, such as Brexit and access to EU workers, and our ageing workforce is not being backfilled by new workers. There is an erosion of the structural capability in the industry,” Mark said.

Here, again, Covid merely exposed pre-existing issues. The labour intensity of construction sites presents a risk of failure and rework, which goes to the heart of GIRI’s initiative, said Mark. But while total output went down when social distancing reduced the number of workers on site, at trade and gang level some productivity went up. “People weren’t trampling over each other, and the interface mismanagement of trade packages was lessened, which gives us an insight into the core problem at site level around productivity, rework and damage. The huge amount of waste in the industry goes to the heart of the problem.”

Decarbonisation will be the biggest driver for change, Mark suggested, but it will add a filter for the workforce because of the new skills required. So too will the Building Safety Bill, as the added layer of competency is likely to impact the available workforce. 

In terms of the future, Mark is a big advocate of modern methods of construction in the broadest sense, which goes beyond prefabrication. He is also an advocate of the concept of ‘pre-manufactured value’. “Every job has a PMV – the percentage of manufactured components whether that is raw materials or a panellised brick façade – and that percentage is the measure of how much was done in a factory or automated environment. Moving that percentage up is an important proxy, I believe, for all good outcomes we are aspiring to and how we de-risk what we do.”

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