Strategic advances?

Last month prime minister Theresa May set out proposals for a “modern industrial strategy” she said would form “a critical part of our plan for post-Brexit Britain”. Greeted warmly by business groups, it was hailed as a “crucial first milestone” in a renewed partnership between business and government by British Chambers of Commerce director general Adam Marshall.

You may, however, be forgiven for thinking this all sounds a little bit familiar. In 2013, then business secretary Vince Cable launched a series of “industrial strategies” for a range of different industries – including, crucially, construction. But mention of that strategy, Construction 2025, or any of the other existing ones remained notably absent from the green paper, and government spokespeople have not since been able to say exactly how they fit in to the new vision.

Confused? Frankly, if you’re not, then you’re probably not paying attention. But potentially worse news than the confusion, is the fact it’s not just Construction 2025 that is absent from the green paper – the industry as a whole gets little mention. While the importance of robust infrastructure to act as an enabler for other industries is stressed, construction itself as an industry sector takes a back seat to the usual poster boy sectors of automotive and aerospace, with emerging deals in other areas such as the life sciences, nuclear and creative industries.

So, is this modern industrial strategy just a case of reinventing the wheel so Theresa May can claim credit for policies largely already in place? Or is there a genuine chance here for a “new deal” between government and the sector? And if so, what are the chances construction can be organised enough to take advantage of it?

Spot the difference

The biggest difference between what May and business secretary Greg Clark are now proposing is the overarching economy-wide nature of this strategy. Drawing together what will ultimately be a series of interventions in different industries, appears to be a determination to drive growth by promoting investment in research, innovation and the skills that support high-growth industries of the future. The strategy rests on 10 pillars (see overleaf), claiming “the evidence shows these areas drive growth” and stresses the importance of both small businesses and exports. To set the conditions for this, the government has already set out a number of actions to improve the overall environment for business, some of which could boost construction (see above).

This economy-wide approach is very different to the sector-specific nature of the industrial strategies drawn up under Cable’s tenure. Construction Leadership Council (CLC) member Ann Bentley, speaking in her position as chair of consultant Rider Levett Bucknall (RLB), says: “Greg Clark was very clear to us this was an overarching strategy to improve Britain – and he wasn’t overly interested in construction per se.”

Nonetheless, at the heart of the strategy is a potential opportunity – a call for individual industries to negotiate “sector deals” with government, to get tailored support. Suzannah Nichol, chief executive of construction trade body Build UK, describes a potential sector deal as a “huge opportunity” for the industry, and Andrew Wolstenholme, chief executive of Crossrail and chairman of the CLC agrees. “I’m very excited – it’s timely and it’s a catalyst for change,” he says.

Modelled on the city deals signed by government in the last five years with major cities, these also have a crucial difference from the industrial strategies of the past. Construction 2025, which sets out targets for the industry to increase exports, reduce carbon emissions, speed delivery and reduce cost, is essentially a government-endorsed vision of where the industry needs to get to. But it says (and does) little about how to get there. It has never been funded as such, and as a spokesperson for business department said this week, has never formally been considered government policy.

Leadership [in the sector] is actually at a better place than at any time in the last five-to-six years

Richard Threlfall, KPMG

Hence, as much as bodies like the CLC and Build UK have devoted time to progressing Construction 2025’s ambitions, there has remained widespread scepticism over the industry’s ability to meet them. These sector deals, in contrast, hold out the prospect of government help in actually getting the industry to where it wants to go.

While the green paper is careful not to promise funding for those benefitting from sector deals – it talks instead about aligning government policies, addressing regulatory issues and supporting the creation of new institutions – most expect funding would be forthcoming. Indeed, speaking on the BBC’s Today programme when the modern industrial strategy was launched, business secretary Greg Clark said the government would be willing to put money behind the strategy.

RLB’s Bentley agrees that, from her conversations with government at CLC level, “the view is there might be money”. A glance at the automotive and aerospace sectors so heavily referenced in the green paper appears to show how this might work: institutions have been created by the government with the sector to promote innovation, such as the Advanced Propulsion Centre and Centre for Connected and Autonomous Vehicles, together receiving hundreds of millions of pounds of public money.

It is not hard to see how similar such help could hugely encourage, for example, industry collaboration over improving construction’s woeful rate of R&D investment, which last year’s Farmer report said was worth only 0.1% of its output.

Simon Rawlinson, also a CLC member, but speaking as partner at consultant Arcadis, says: “This creates a great opportunity to pump prime what the CLC is talking about – it partly takes the risk out of R&D. It will be a lot easier to get people to collaborate with the backing of this strategy. It’s an opportunity for senior players to engage, with something tangible at the end.”

Fragmented industry

So if that’s the opportunity, the question, therefore, becomes how to take advantage of it. And here’s the rub. The green paper is crystal clear what the government will need from an industry before it will get a sector deal, and it’s not something construction’s known for: leadership and unity. The green paper calls the sector deals “an open call to business to organise behind strong leadership to address shared challenges and opportunities.” If that wasn’t quite clear enough, it adds that “the prospects of creating a compelling proposition are significantly enhanced if there is clear leadership acting as a focal point for the development of proposals”.

The lack of a body representing the industry in its entirety has long been recognised as a problem for construction. Only last October Mark Farmer’s review of the construction labour market for the government highlighted “leadership fragmentation” as one of the big issues holding the sector back. He pointed out the body in the best place to provide that leadership, the CLC, did not have any dedicated staff and “does not have a wider mandate to represent and lead on behalf of the collective industry and its clients.” In addition, “the industry’s own representative bodies are, generally, highly fragmented and often serve only particular subsets of the industry”, concluding this together had led to “a lack of joined-up strategic thinking” bringing together government, clients, major contractors, specialist contractors and relevant professional bodies.

Put this historical context next to the lack of any significant mention of construction in the green paper, and it’s no wonder that RLB’s Bentley says “there’s no question there’s a risk” that construction won’t manage to win a deal.

For Graham Watts, chief executive of the umbrella group for construction’s professional services bodies, the Construction Industry Council, the government’s approach is wrong-headed. “It’s a no-brainer that construction should be part of the industrial strategy,” he says. “If the UK doesn’t have a functioning construction sector it won’t be a leading economy. The idea you’d only support it if it can show strong leadership is a nonsense when you consider it.”

I’m very excited – it’s timely and it’s a catalyst for change

Andrew Wolstenholme, CLC

However, it is not clear whether that kind of argument will get much traction with government. More positively, recent efforts to address the leadership question seem at least to be moving the industry in the right direction. Following a restructure last year, the CLC, led by Wolstenholme, has been refreshed and is winning praise for a newly clarified focus.

Also, last year the merging of two of the sector’s largest trade bodies to form Build UK, representing contractors, specialists and increasingly clients, is bringing previously competing voices together.

Richard Threlfall, head of construction at consultant KPMG, says: “Leadership is actually at a better place than at any time in the last five-to-six years. I’m sensing lots of people saying that we need to use the CLC as the vehicle for this engagement.”

In addition, both Wolstenholme and Build UK’s Nichol are aware of the challenge around unity contained in the green paper and are factoring it in to how they respond. The CLC, for example, has already called an extraordinary meeting to discuss its response, likely to be this week.

Nichol says: “The biggest challenge will be to work out who’s best placed in the industry to do different parts of it. We can’t all be Jonny Wilkinson – somebody has to cut the half-time oranges. I think we’re in a pretty good place to do that, and if we don’t do it we’ll miss the opportunity.”

Wolstenholme admits the industry will have challenges demonstrating a track record in collaborating to improve productivity in the way the government is looking for, but that it can rise above these. “That’s our job – to turn the known challenges into opportunities for improvement, and for promoting the solutions we already have. I anticipate the government will make us [the industry] central to its strategy.”

What construction wants

If the industry can bring itself together, it then has to decide what it will ask for. There is little appetite it seems to attempt to rip up Construction 2025 as a guide to where the industry wants to get.

In addition, Wolstenholme says the CLC will push on with a newly launched three-pronged strategy for delivering that, focused on improvements in digital technology, off-site manufacture, and the whole-life performance of buildings.

The biggest challenge will be to work out who’s best placed in the industry to do different parts of it

Suzannah Nichol, Build UK

Arcadis’ Rawlinson agrees: “The fundamental targets set in Construction 2025, around cost, time and carbon are still right for a successful post-Brexit British economy.” While Build UK’s Nichol says: “For me revisiting Construction 2025 would be a real waste of resource as we’re already delivering on that. But the next stage is to work out what does the industry coalesce around in terms of this strategy.”

So, if Construction 2025 provides the direction of travel, and the CLC’s revised agenda the focus of efforts, what specific help should the industry pitch for from government? Following the example of the automotive sector, there already seems to be growing enthusiasm for the creation of an institution – possibly a centre of excellence – which can facilitate industry collaboration on R&D and innovation.

While Wolstenholme and Nichol both stress no final decisions will be made until further consultation, both are interested in pursuing this idea. Wolstenholme says: “There’s a real opportunity if you pool together some of the resources firms spend on innovation, and you get a deal to match fund that from government.

“You can look at how the automotive and aerospace sectors have collected around the high-value ‘catapult’ centres. It wouldn’t necessarily need a building – but that could be an output. It would make it easy to see what value you’re getting.”

RLB’s Bentley agrees. “Both the CLC and the Infrastructure Clients Group have broadly come to the conclusion that construction needs some kind of nationally acknowledged centre of excellence – a place where innovation and new ideas can be built.” Wolstenholme says help from government will also be needed on improving skills, and that “both together [could] improve the productivity in the sector”.

However, it is clear there is a long road to go before construction can be sure of securing this kind of help, with the government asking for green paper responses by 17 April. The experience of city deals – on which these sector deals are explicitly based – is that there are both winners and losers. Construction will need to manage its many organisational egos very carefully indeed in order to avoid being one of the failures.