Tag Archives: Brexit

Construction “on a knife-edge”

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The latest Construction Skills Network report from the Construction Industry Training Board (CITB) suggests the health of the construction industry over the next five years is on a knife-edge, heavily dependent of a few politically sensitive infrastructure projects of huge scope, according to new industry forecasts.

Industry fortunes depend on smooth progress for big projects like the £18bn Hinkley Point C and £14bn Wylfa Newydd nuclear power stations, and the £55bn HS2 rail project.

The 2017-2021 Construction Skills Network (CSN) report predicts growth of 1.7% over the next five years, with 179,000 jobs to be created, reports The Construction Index this week.

Arcadis Brexit imageA year ago (read our blog post), before the EU referendum, CSN was forecasting 2.5% average annual growth and 232,000 new jobs needed. After the referendum, CSN downgraded its growth forecast to 2% a year and industry-wide recruitment need to 157,000 (we noted the potential Brexit impact in June 2016, and highlighted the Brexit views of Arcadis in November 2016 too).

The new CSN forecast suggests the fortunes of the post-Brexit construction industry are heavily dependent on the big politically sensitive infrastructure projects starting main works on time as infrastructure represents 45% of all predicted construction growth over the next five years.

Brexit impact

With the UK withdrawing from the EU, job growth in the UK construction industry will be slower than indicated in last year’s report, but construction overall still needs 35,000 new workers every year.

As these projects are particularly politically sensitive, the report makes clear that the forecasts are heavily qualified, making it unclear what weight should be put upon them. “All predictions for the construction sector are made against a backdrop of ongoing political and economic uncertainty. The impact on the construction pipeline of Britain’s vote to leave the European Union is one of the most significant unknowns,” the report says.

Infrastructure key

It adds:

“As wider economic turbulence can affect many parts of construction, the commitment to infrastructure is helpful to the forecast. But, with output growth so reliant on these major projects, any shifting of the goalposts on, for example HS2 or nuclear new build could be felt throughout the industry. If, for example, Hinkley was taken out of the pipeline, total construction output for 2021 would be 0.8% lower than currently predicted. And the reliance on large infrastructure projects means that forecasts, particularly those made over the longer term, are less balanced than in the past.

“However, the changing of the guard at the top of government in the UK has, so far, not affected its commitment to the National Infrastructure Delivery Plan. The government is still pledged to invest over £100 billion in infrastructure by 2021.”

It continues:

“Profitability remains a concern, with the volatility of material and labour costs squeezing margins. The situation is not helped by deteriorating levels of productivity, and there is also the prospect of a potential gap in the labour market resulting from any changes to immigration policy.”

The CSN report shows there will be job opportunities in particular for carpenters (+3,850 per year), electricians and insulators (+2,250), process managers (+2,150) and a range of IT and other technical workers (+5,240).

CITB director of policy Steve Radley said:

“We expect construction to keep defying the economic headwinds, with almost half of its growth coming from Hinkley, HS2 and Wylfa and other infrastructure projects.  These huge projects give our industry a great chance to seize the initiative on skills and start investing in the next generation and upskilling the current one. So it’s vital that we don’t throw this opportunity away by allowing these projects to slip or get squeezed together and worsen the pressure on key skills.”

CITB interim chief executive Sarah Beale said:

“While we are forecasting slower growth for our industry than we were last year, employers will still be creating tens of thousands of new jobs. We will be working with employers to attract new talent into our industry and to train them for rewarding careers in the sector.

“While we have factored Brexit into this forecast, there remain many unknowns to life after leaving the EU. We will be working with our industry to understand what it means for our migrant workforce and what we must do to attract and grow more of our own.”

Housing white paper: little new on skills

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Fixing our broken housing market

The Government’s new Housing White Paper, Fixing our Broken Housing Market, mentions skills 20 times (most of the mentions are on page 41) in a largely underwhelming document over 100 pages long. However, it doesn’t say anything particularly new or radical about skills – though this is perhaps to be expected from a Conservative Government writing about an inherently conservative industry (and house-building is, arguably, the most conservative sector within construction).

It makes a passing mention of Mark Farmer’s review, Modernise or Die, published in October 2016 (read our post), touching on his advocacy of offsite fabrication (read this Construction Index summary, for example), and acknowledges that the industry faces particular challenges in certain regions, such as London and the South East, as Brexit looms. It continues:

“This is an important moment and we should make the most of the opportunity for industry to invest in its workforce, alongside tackling the issues raised by the Farmer Review. The larger companies need to take responsibility for ensuring that they have a sustainable supply chain, working with contractors to address skills requirements.”

Three areas are singled out for Government action. It says it will:

  • Post-16 Skills Plan“change the way the Government supports training in the construction industry” – This will include the conclusion of an ongoing review, chaired by Paul Morrell, of the Construction Industry Training Board’s purpose, functions and operations, with the government looking to “ensure that developers benefitting from public funding use the projects to train the workforce of the future.”
  • “launch a new route into construction in September 2019” – as announced in the Skills Plan produced in July 2016 (blog post), it says it will “streamline the number of courses available and improve quality and employability”
  • “work across Government, with the Construction Leadership Council, to challenge house builders and other construction companies to deliver their part of the bargain.”

The white paper then highlights what can be achieved from investing in training as part of major construction programmes such as Crossrail, to see whether this approach can be applied more broadly in the construction sector, particularly by holding developers and local authorities to account. This is mainly about improving transparency of the end-to-end house building process, and identifying where blockages lie (encouragingly there are three mentions of “transparent data”). This could be an areas where SkillsPlanner’s modelling of supply and demand of construction skills could play a crucial role, as Mark Farmer pointed out last year.

farmer review cover“The increasing importance of data means that such approaches would better enable the business case for investment in training and new ways of delivering by better aligning investment to a demand pipeline. … The culture of ‘data silos’ within the industry needs to be broken as part of the wider societal democratisation of data.”

 

What ‘a hard Brexit’ means for skills

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Arcadis Brexit image

Industry debate about the impacts of Brexit continues to rage (we blogged about it back in June), and analysis by consultancy Arcadis (read news release; it’s also been reported on Construction Enquirer) suggests that a ‘hard’ Brexit could lead to a reduction of 215,000 people in the UK construction industry – equivalent to around 14% of the workforce.

Arcadis says that a potential ‘hard’ Brexit scenario – such as extending the points-based system currently in place for non-EU migrants – could see EU construction workers leaving the industry at a quicker rate than they can be replaced. If this plays out, Arcadis estimates that almost 215,000 fewer people from the EU would enter the infrastructure and house building sectors between now and 2020.

Even with a ‘soft’ Brexit, the construction workforce could again reduce in numbers. Arcadis’s analysis of a quotas scenario and sector-specific policies allowing some EU migration into the sector still forecast that 136,000 fewer EU nationals would come to the UK to work in construction.

Arcadis director of workforce planning James Bryce said:

“What started as a skills gap could soon become a skills gulf. The British construction sector has been built on overseas labour for generations, and restrictions of any sort – be it hard or soft Brexit – will hit the industry. Missing out on over 200,000 people entering the workforce could mean rising costs for business, and much needed homes and transport networks being delayed. In recent decades, there has been a massive push towards tertiary education which has seen a big drop in the number of British people with the specific skills we need. If we cannot import the right people, we will need to quickly ramp up training and change the way we build.

“Be it hard or soft Brexit, we need to take back control of the construction industry. The likes of robotics and off-site manufacturing have never been taken as seriously as they should, but they could well prove the difference. So, too, could training. Working with schools and colleges is one way of taking control but this takes time. In the short term retraining and turning to the unemployed and underemployed could be a significant benefit to an industry under significant pressure.”

The reshuffle dust settles …

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GCS 2016-20

As the UK political establishment settles down after the EU Referendum (post) and the resulting spate of resignations and changes of office, the UK construction sector is now beginning to identify the new figures who will be leading key initiatives on areas such as housebuilding and planning, construction strategy, and skills.

Prime Minister Theresa May’s Cabinet reshuffle saw a plethora of new appointments, and as the various Cabinet ministers have begun to settle into their portfolios and some tasks have been moved between ministries, various junior minister posts have also been finalised.

Succeeding Nick Boles, Harlow MP Robert Halfon is the new apprentices and skills minister, appointed by education secretary Justine Greening – the skills brief having been moved from the former Department for Business, Innovation and Skills (BIS, now the Department for Business, Energy and Industrial Strategy, BEIS). Halfon appears well-suited to his new brief. He employed the first parliamentary apprentice, and says he has “led from the front in championing apprenticeships.” We assume he will be taking responsibility for pushing forward the Government’s Post-16 Skills Plan, its response to the Sainsbury Review, published last week (post).

From our point of view on the SkillsPlanner project, another key appointment has been Croydon MP Gavin Barwell, appointed the new housing and planning minister in the Department of Communities and Local Government (DCLG). Barwell is also minister for London; our two-year SkillsPlanner project is strongly focused on London and the southeast, and we expect Barwell will be working closely with London Mayor Sadiq Khan (post).

And, Cabinet Office minister Ben Gummer, MP for Ipswich, will oversee the government’s own construction strategy (post) and programme, lead on its procurement policy, and also look at digital transformation of government. The latter particularly interests SkillsPlanner; data, much of it provided by government or government-funded organisations and projects, is at the core of our open linked data platform, and the wider construction industry is also engaged in a deeper digital shift outlined in the February 2015 Digital Built Britain strategy (post).

Update (1 August 2016) – At BEIS, Jesse Norman MP, minister for industry and energy, will be responsible for industrial policy covering infrastructure and construction.

Brexit vote hits construction skills

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CM screengrab

Early in the morning of Friday 24 June 2016, the UK construction skills crisis potentially got a whole lot worse.

Once it was announced that the UK had voted to leave the European Union, construction bosses quickly began to wonder about the industry’s reliance on workers from across the English Channel. And, later, as the stock market plummeted – with homebuilders’ and contractors’ shares among the hardest hit – and as the value of sterling dropped to a 31-year low, the challenges facing construction grew even greater.

Of course, to some extent, the existing problems were of our own making. For years, the UK construction industry has failed to recruit and retain sufficient home-grown employees to staff its projects.

Why would people want to join an industry that has for decades been recognised as overly-complex, fragmented and price-fixated in its procurement approaches, adversarial in its supply chain relations, wasteful in its project execution, conservative in its adoption of new technologies, and short-termist and reactive in its approach to human skills development and R&D? (post). That short-termist approach to skills is evident in construction’s failure to retain older workers (Catch them when they’re older), its lack of diversity, and its failure to address fundamental issues that result in the industry being unattractive as a career option (To change the image, first change construction).

pre-referendum survey finding tweeted by ConstructionUKThe Brexit vote makes the skills issue even more challenging. Even before the referendum, many warned that a ‘Leave’ vote might hit construction particularly hard.

Construction industry leaders are now seeking greater collaboration between government and industry to address the skills crisis. For example…

  • the Federation of Master Builders CEO Brian Berry warned that “wrong moves by the Government could result in the skills crisis becoming a skills catastrophe” (reported in Training Journal)
  • Infrastructure Intelligence reported the thoughts of Arcadis consultancy boss, Alan Brookes, who said:

“Construction markets are likely to become more volatile in the short term and we need to consider a joined-up approach to sustaining the capacity and capability of the industry. … One of the big questions we now face is: how can we ensure we have enough people with the right skills to build the houses, roads and rail lines of the future? In the future, European labour may no longer be the safety-valve it has been, so we must plan to use the workforce differently. Using more offsite components and investing in skills and the management of projects will now prove absolutely vital.”

  • The same article also quoted EY’s Malcolm Bairstow:

“A significant proportion of the UK’s builders and construction labour is sourced from Europe and there will be uncertainty over what happens next. If we start to see a movement of these workers out of the UK, this would inevitably cause a slow-down in construction and house-building which could also have a significant impact on development across the country.”

  • And in Construction Manager today, the National Federation of Builders CEO Richard Beresford says: “The lack of skills for the pipeline of work we have is the defining structural issue for the industry. … We need to rethink how we draw people to construction and the breadth of opportunity available.”

At least we have been aware of the skills gap for some years and Government and industry have started to take steps to improve the industry, to foster recruitment and training, and to be more strategic in its pipeline planning. SkillsPlanner is therefore now more important than ever in helping UK construction anticipate future construction skills demand and ensuring there is sufficient supply of well-trained workers to meet that demand.