NMBS Conference 2014: The outlook for construction
Published: 20 June, 2014
The first speaker at this year's Conference was Government Chief Construction Advisor Peter Hansford, who gave delegates an economic overview of the construction industry, and his thoughts on what lies ahead for merchants.
"Construction appears to be picking up," he said. "This is happening in London in particularly, although it may seem as if central London never felt the impact of the recession, but outside the capital, construction has been very slow in recent years."
Mr Hansford said that projects are now springing to life all over the country, something that he said is all very encouraging. The growth, he believes, has been fuelled by the housing shortage and the Help To Buy scheme, which has given confidence back to the market, but he said he is also seeing an increase in confidence from private sector investors, something which was largely missing during the recession.
The construction industry adds £90bn a year to the UK growth value, and comprises between seven and eight percent of the total UK GDP, making it a very important part of the wider UK economy. In terms of jobs, construction accounts for 3m jobs - or 10% of UK employment.
The outlook for global construction is also looking positive, he said, being forecast to grow 70% by 2025.
All these figures, Mr Hansford said, means that the construction industry has a very wide reach, impacting and enabling growth in many other industries as a result.
The Confederation of British Industry (CBI) itself recently stated that construction "sits at the heart of the UK economy", something which the government and other main political parties have also recently acknowledged.
The Government's Industrial Strategy: Construction 2025 was launched recently, Setting out a vision and a plan for long-term strategic action by government and industry to work together to promote the success of the UK construction industry.
"This is a vision which will help us to create new buildings much faster and with much better whole-life asset management," he said, "in partnership with a global market. We want to create an industry that leads the world in smart infrastructure, that is respected by society and which encourages people to enter it and take up great careers."
By 2025, as part of this strategy, the government wants to see the industry deliver buildings with a 33% reduction in costs and with a 50% reduction in the time to build from inception to completion.
"To achieve this, the whole industry needs to do things very differently," Mr Hansford explained.
Construction 2025 sets out the framework strategy and goals for both government and industry, but doesn't go into detail about exactly how the sector is going to achieve this, so Mr Hansford went on to highlight a number of issues which he believes must be tackled in order to make construction successful in the long term.
"People sit at the very heart of the construction sector," he said. "We need to retain the right people and become an industry of choice. We need to inspire schoolchildren to consider working in the built environment at a very young age - perhaps even 11 or 12 years old - and that means inspiring their teachers and parents to guide them as well."
Mr Hanford urged the industry to work hard to improve its image, making workplaces safer and better places to work. He said that standards need to be driven up in the domestic sector in particular, as for many members of the public that is the main contact that they have with construction, and so their experiences in this area often influence their opinion of the wider industry. "The whole sector is often judged by the actions of smaller companies," he noted.
He also believes that the industry needs to become more diverse in terms of ethnicity and gender, and that more apprentices should be employed across the entire industry.
As technology continues to evolve, Mr Hansford believes that the construction industry must make sure that it remains on the cutting edge of new products and ways of building. He highlighted Building Information Modelling (BIM) in particular as something which he believes is going to become a crucial, central part of the industry, because of its potential uses in off-site manufacture. This, he believes, is going to become increasingly popular as the industry develops, at least in part because it makes manufacturing both safer and faster.
Environmental considerations are transforming every aspect of how the building industry works, "changing what we build and how we build it". Mr Hansford said he believes the industry must continue to find "new and innovative" ways of bringing low carbon construction into the mainstream, but not just in the newbuild sector. He said that upgrading the existing building stock is just as important as improving newbuild standards.
The global construction market is going to see growth in the coming years, bringing with it significant opportunities for the UK to increase its global trade. In order to do that successfully, however, the UK needs a "strong and resilient" UK supply chain. As the recession has hit many small companies in the industry the hardest, Mr Hansford drew delegates' attention to the lack of finance available for small companies looking to invest and grow. This, he said, is something that needs serious consideration in the coming years.
He highlighted the work that is currently being done to introduce a new Construction Supply Payment Charter. First introduced at Easter 2014, this sets out 11 key points to help improve the flow of finance throughout the sector, from large companies down to small subcontractors. One of the main points in the Charter is the aim to reduce construction industry payment terms to a standard 30 days by 2018, with staggered targets set between now and then to help the industry manage this change.
Construction 2025 contains some ambitious aims and objectives, but Mr Hansford noted that it already has strong support from the industry. However, he noted that developing the aims is one thing, but taking it forward successfully is another matter. The Construction Leadership Council (CLC) has been set up to help oversee the changes that will be necessary in order to achieve the Strategy's goals. When questioned, he said that while it was unlikely that the industry would ever be able to speak with one voice as it is too diverse, he said that he believed it was finally getting to a place where constructive discussions could take place.
Mr Hansford then went on to outline some of the key ways in which these strategies and the growth forecast over the coming years are likely to affect builders' merchants in particular. He said that merchants are likely to be able to enjoy an annual growth rate of up to eight percent per year by 2025 as the market grows, but that they will have some challenges to deal with along the way. Among these is likely production capacity issues, as the rate of growth and demand outstrips the industry's capacity to supply product. This, he noted, has already been seen in certain sectors including bricks, but more manufacturers will need to work hard to ensure that the supply chain doesn't suffer from issues like these, or the industry will struggle to achieve its overall ambitions.
He also said that we will see a growth in low carbon solutions coming on to the market as the industry gets greener, with rapid technology changes including BIM and off-site construction creating further challenges and opportunities.
"I don't have a crystal ball," he concluded, "but I know that all political parties recognise more than ever the importance of construction to the wider economy, and that has to be good for the industry."