The industry has been talking about some of its endemic issues for so long that eyes almost glaze over whenever someone mentions “skills shortages” or “payment problems” or “improving the image of the industry”. After all, if these problems have been with us in one shape or form for at least two decades and they haven’t caused any sites to grind to a screaching halt, maybe we should just learn to live with them?
But it’s only now, when these issues are combining to shrink the industry’s capacity to take on new projects in a time of rising demand, that they’re starting to look less like conference break-out topics and more like the underlying causes of serious weaknesses in the business model at the heart of the UK industry.
Looking at the string of contractors posting poor results and minimal margins – from Balfour Beatty to Laing O’Rourke; Vinci to Sir Robert McAlpine; ISG to Morgan Sindall – it’s hard to escape the conclusion that the structure of the industry, reliant on stretched supply chains and self-employed labour, increased their risk profile and shrank their profits. And that those same structural issues contributed to the poor reputation that in turn contributed to recruitment shortfalls: the industry is an inter-linked system of cause and effect.
So the challenge now – and the new word on everyone’s lips – is productivity. That typically means investing more in new technologies and engineered solutions that allow contractors to achieve greater output per head. And it could also promote a shift to more direct employment and better working conditions. According to Glenigan, there are some suggestions that contractors searching for productivity gains are starting to hire and train more in-house staff to reduce their reliance on specialist subcontractors – although the shift is more anecdotal than statistical right now.
The drive to technologise and industrialise construction is already happening, of course, with Skanska a keen proponent (with pilot projects in 3D printing and “digital tag and track”.) The contractor’s experiments with “flying factories” demonstrate another way forward (and incidentally, also hinge on greater direct employment).
There is general agreement that greater adoption of “smart” solutions has to be part of the industry’s future, although Laing O’Rourke’s experience (it made a £57.5m loss linked to its Design for Manufacture and Assembly approach on three major projects) will give many pause for thought. But the assumption has to be that they suffered from being out of sync with the rest of the industry and client expectations – and those factors will soon change.
Because, if the industry can’t evolve better systems and processes, more able to meet the needs of clients in a more technolgised future – think robots, think driverless cars – then it’s a fair bet that there are plenty of circling sharks scenting their opportunities.
Elaine Knutt, editor
