Leader: Time for intervention in free-falling free market

8 June 2012

Elaine Knutt, CM editor

So do Osborne, Clegg and Cameron have a Plan B? At the end of last month, as the IMF suggested that the UK adopt “policies to bolster demand” and the depth of the double dip became more apparent, it began to look like as if they might. In a recent edition of the Financial Times, LibDem leader Nick Clegg indicated that the government was ready for a “massive” increase in state-backed investment into housing and infrastructure — followed by less impressive talk of government guarantees for homebuyers and private investors.

We’ve been here before: the coalition says what everyone’s hoping for, then later “clarifies” it to something entirely different. But two years into a tough austerity programme and with no sign of economic growth, plus the next General Election edging into view and France’s recent conversion to spend-as-you-save, maybe the coalition really has decided it’s time to loosen the purse strings.

At the same time, we have the “will they won’t they” Greek drama, which is likely to drag on for several more acts. No one knows what the impact will be, but so far we have seen the euro losing value, and the money markets fleeing towards sterling and the UK’s AAA credit rating. Bad news for anyone whose business involves exports, good news for the Treasury because borrowing costs come down.

So will these two trends combine to support construction, a major part of the economy that doesn’t actually export anything and instead drives demand for UK manufacturing and generates employment?

The argument has been made time and time again, but has so far been rejected by a government wedded to the notion that a free market will spontaneously create growth. It was a good theory, but only ever a theory.

Now, surely, it really is time for a Plan B that halts the continuing falls in construction output and lets more businesses plan for the future.

No government-backed national advertising campaign because it’s a “market-led” programme. No fiscal incentives because the Treasury won’t countenance reduced VAT receipts or stamp duty revenue. No consequential improvements, no compulsion on local authorities to retrofit. Reading all these things about the Green Deal, it’s hard not to think the government doesn’t really want it to succeed.

Because there’s strong evidence that, given a free choice, Mr & Mrs Average won’t spend their money on energy efficiency even if it makes economic sense in the long term. The utility companies often found they couldn’t even give away loft or cavity wall insulation — homeowners are wary of the disruption and sceptical of the claims, and find it hard to quantify small savings over a number of years.

As above, we have a government that’s committed to a free market, free choice and minimal intervention, and the risk that a Green Deal built on that ideology will fail. But the evidence from the Gentoo pilot does suggest that history isn’t necessarily a guide to future performance. Gentoo tenants were dealing with a trusted intermediary, their social landlord, rather than a utility company, and they responded well to the element of personal choice, bringing energy efficient retrofits into the same category as buying a car or a sofa.

It won’t be easy for Green Deal providers to replicate that sort of response. But the Sunderland pilot has shown it’s possible, and that the Green Deal is by no means doomed. The free market might not work for construction at a national level, but it might just be right for Mr & Mrs Average.

Elaine Knutt, editor


Shelf fulfilment or self abuse?

Grahame Wiggin MCIOB
In the May edition, the article detailing the new archive facility in Maidstone (Shelf fulfilment, CM May) refers to the building cutting an imposing figure in the town. The accompanying photograph gave me the impression that the buildings create an overbearing and brutal intrusion. Surely views of the other elevations are better than the one published? If not, it appears that architectural fashions of the sixties have returned. It is described as a citadel, but that gives it too much romance, I prefer fortress. Ugly and brash methinks, I do hope Maidstone likes it.

Let’s get accurate quotes

Bill Price
Re RICS launch of new Black Book (online story). The cost would go down if quantity surveyors started producing a Bill of Quantities with quantities in, instead of just producing an inaccurate list of items to allow for. If you think six main contractors send out to six subcontractors that’s taking off the same job 36 times. That can’t be economical can it?

Peter Berry
As a QS who qualified in 1959, I totally agree. Even “allow for” contractors’ risk items should be carefully described (for example, in Hong Kong government contracts we measure health and safety risks). QSs need to keep at the forefront of their minds the RICS’s latin principle “...all things are measurable” (or words to that effect) and get with doing the job they signed on for.

Why no party wall award?

Peter Clarke
Re Stephen Clarke’s case notes (CM April). There’s no mention of a party wall award in the summary. Too often building owners try to avoid this statutory requirement, but costs of around say £4,000 all said and done, might have enforced sufficient cooperation to avoid some of these problems and appraised the respective owners of their obligations.

The problem with schools

Robert Avant
Re your report on the performance of school buildings (online story). The problem with schools is that architects wish them to look pretty so the fabric costs a fortune. We should be designing well-insulated metal box schools and spend all the design money on versatile spaces within.

Vox pop

Who should replace Paul Morrell as chief construction adviser?

Graham Kean
Partner, EC Harris

My nomination would be either Keith Clark, ex-CEO of Atkins, or Richard Clare, former chairman of EC Harris. We need an adviser who understands how the industry works from a global perspective and has an overview across all sectors, segments and disciplines. They should understand investment, appetite for risk, and know what levers the government can pull to build confidence in the industry.

The ministry is awash with policy advisers, but this isn’t about badge collecting on the way towards a gong, we need a seasoned business leader who has the respect of the industry and first-hand construction experience on large-scale projects.

Tim Lewis,
Contracts manager, IB Construction

Whoever’s appointed needs to be able to ensure the government gives more support to SMEs.

The way public procurement strategies are going, SMEs don’t get an equal opportunity, especially on public frameworks where major contractors have the resources and time to bid for work. The adviser should urge government to make it mandatory for the inclusion of SMEs during all stages of public projects, as too often the big boys involve SMEs to tick boxes to win a job, but once a project is up and running the SMEs are dropped and they complete the work themselves.

The use of Building Information Modelling on public projects also puts SMEs on an unequal footing when competing for work as smaller firms don’t have the resource for training, or a BIM coordinator. We recently lost out on a bid for a £4m council project because we didn’t have the BIM credentials of other competitors, where previously this would not have been an issue. The new adviser needs to address this inequality.

Paul Nash
Director, Cyril Sweett

Everyone talks about the lost generation, and my primary concern is that there is very little investment in employment growth and training and development, so we need someone to lobby for the future of the industry.

For me this means an individual from one of the big UK contractors, such as James Wates, who has been at the coal face. He comes from a family business with a long construction history and therefore knows the impact the recession is having on our workforce.

There’s currently so much short termism in terms of investment in new staff and training and development, too many firms are driven by the next quarterly statement. As a result, prospects for graduates are horrendous and massive skills gaps are on the horizon. The adviser must take a long-term view of the industry and show government it’s worth getting behind.

Nigel Bellamy
Director, 8build

Olympic Delivery Authority chairman Sir John Armitt would have got my vote if he hadn’t have ruled himself out. Having delivered the Olympics on time he certainly has the gravitas to carry the role and he’s well used to working with government departments, local authorities and the private sector.  

We need someone like Armitt who has the breadth of knowledge of how construction is funded, procured and delivered.

The appointed adviser would also need to help push the sustainability agenda.

Peter Gracia
Director, Gracia Consult

The appointed adviser needs to be truthful about the nature of the industry’s makeup without trying to sugar the pill and make it appear like a slick model of big business.
There’s an increasing marketing machine behind large contractors and professional bodies, which promote headline projects as if everything’s a model of efficiency, but in fact the vast majority of firms in this country are small companies that often don’t operate as they should.

Having been hard hit by economic recession, the construction industry is in a difficult position and faces more challenging times ahead as our economy begins its slow recovery. During these difficult times we need to take care to look after our current workforce and continue building a workforce for the future.

Our industry needs a leader who can help guide the industry through the present difficulties and nurture its future growth.

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