Making the most of 2021

With covid-19 induced uncertainties, the chancellor of the exchequer’s autumn budget was abandoned last year in favour of a spending review, with a shorter time horizon of one year and the deferment of some major spending decisions until this year.

The chancellor told us that the UK economy would shrink by 11.3% last year, the biggest contraction in 300 years, and that overall debt would exceed 100% of GDP – not a great story.

2021 represents a window of opportunity for the construction cost element of project viability, before prices inevitably rebound

However, the spending review reflected the government’s commitments to reduce inequality between London and the rest of the country, to invest in infrastructure, to push a green revolution and to make the UK more competitive in a post EU world. This would be achieved through: a £4bn ‘levelling up’ fund to upgrade infrastructure across the country; the creation of 10 freeports as hubs for global trade; a £7.1bn National Homebuilding Fund and a new UK infrastructure bank based in the north of England, which will focus on projects to support the government’s 2050 net zero carbon target.

Under the heading of fairer, faster, greener the recently-published National Infrastructure Strategy is focusing just as much on research and innovation, creating new wealth-generating clusters (beyond Cambridge), further supporting the ‘levelling-up’ agenda. Recognising an historic failure to fulfil infrastructure investment promises, the prime minister claims that this will finally change, putting “calcium in our national bone structure”. These are more uplifting thoughts for 2021.

Cost can be eliminated from the design and construction process by placing the detailed design under the control of the party best placed to undertake it

In terms of the property and construction industry, the uncertainty and challenges of last year have seen a response of increased competition and a reduction in margins, together with some tactical pricing – but the extent of this has been softened by material price inflation and a more considered approach to tendering compared with earlier recessions: the backdrop of enduring financial fragility on the supply side is discouraging many firms from chasing turnover in exchange for robust accounts. Some, who are able, are also turning their attention to the government’s infrastructure proposals.

With tender prices having gone through a deflationary period and likely to remain flat (at the most) for a period of time, 2021 represents a window of opportunity for the construction cost element of project viability, before prices inevitably rebound. The difficult question is: how long will this window of opportunity last before this rebound occurs? The success of covid-19 vaccines will be influential in driving this timeframe.

The challenges of last year, whether those be development appetite or forced changes on construction sites through social distancing, also caused industry leaders to re-think how design, procurement and construction could be improved and made more efficient through a mindset of ‘back to basics’.

> Procurement update: increasing productivity

By way of example, a building is often designed twice and built once – designed for tender and then redesigned by the contractor’s supply chain to facilitate construction. Sometimes what appears the most straightforward of package designs, such as drylining or blockwork, are just not suited to the needs of the builder. There can be a lack of technical understanding from the designer, the cost consultant, and the main contractor about how best to convert the information into construction detailing. Poor tenders and site problems can result.

Cost can be eliminated from the design and construction process by placing the detailed design under the control of the party best placed to undertake it. Naturally, a design should be co-ordinated at key milestone stages, particularly RIBA Stages 2 and 3, but beyond this, the benefits of engaging with industry to complete detailed design in a more integrated model is critical to remove waste (in process and construction) and improve efficiency, delivering better quality at reduced cost.

A typical example being drylining. A design team will seek to develop a detailed design for drylining based on industry standards that best suit the architectural and performance criteria of the particular building. On a major project this could result in as many as 30-40 different drylining wall types. Drylining subcontractors will see this as frustrating: technical design of multiple wall types complicates co-ordination with other trades, and procurement of materials, supervision of installation, and creates more waste. The supply chain’s approach would be to reduce the number of wall types to optimise cost and time. While to many, the trade may choose wall types that mathematically could look more expensive, consistent detailing will create efficiencies in construction to optimise time and cost.

It is fair to say that there is a way to go yet before full confidence in property and construction is restored. Some may worry that Brexit, covid-19 and climate change represent a perfect storm for the UK, but the imaginative responses of the UK construction industry represent an opportunity to ‘burn away the deadwood’, rebooting the industry to finally embrace technologies that are already in place, while doing the simple things consistently well. These things being: set up projects for success, make BIM and digital working the default setting, strive for smart simplicity in design, focus on net zero carbon in a way that reduces resources and costs and challenge the product to reflect a changing world. What a fantastic manifesto for 2021 …

Iain Parker is a partner at Alinea