Infrastructure can get us match-fit for Brexit’s opportunities
With the UK’s exit from the EU only 12 months away, investment in infrastructure and a successful construction sector is key to success on the global stage, says Mace's Jason Millett.
The government has placed improving the UK’s lagging productivity levels at the heart of its industrial strategy and budgets. The rationale for this is simple: if we are to improve living standards, grow our economy and compete on the global stage we need to be more productive.
Many of the problems are well known. It takes a German worker just four days to complete what a British worker does in five, while UK R&D spending and the number of those with professional or technical skills lags behind most other western countries.
With our exit from the EU now only 12 months away, we need to do all we can to get match-fit for the opportunities and challenges Brexit presents. One of the best ways to do this is investment in our infrastructure.
Infrastructure can make it easier to conduct global trade, allows businesses to access more skilled people and allows towns and cities to work more closely together to output greater than the sum of their parts. Plus, it allows British firms to develop the major programme expertise to then export those services overseas.
To the government’s credit, they too have recognised this. Investment in infrastructure and house building are central planks in the productivity plan which is backed up by the £31bn National Investment Productivity Fund and a growing £600bn national infrastructure pipeline.
With the demise of Carillion, questions are being raised about the construction sector’s ability to deliver this enormous pipeline of work and the business models in our sector.
Over the last two decades productivity in construction has been pretty much flat, while other sectors such as manufacturing and services have seen improvement of over 40%. With a quarter of the construction workforce due to retire in the next decade we need to see a 33% increase in construction productivity just to stand still.
With incredibly tight margins and challenging projects to deliver, it’s no wonder that some in our sector are struggling to invest in the technology, skills and R&D required to see the change required. The £170m Construction Sector Deal is welcome, and will help, but to see a real transformation we need to change the relationship between asset owners and those who have to deliver those projects.
More often than not in recent years procurement on major schemes seems to have been heavily driven by cost. While we all want to deliver the best value for money for taxpayers and investors, this can often be a false economy - as we have seen with Carillion. Because if margins are unsustainable and companies go under, the risk is passed back onto the client’s shoulders. We need to move to a truly collaborative relationship where outcomes are shared and so are the risks and rewards. It’s only by changing the relationship will we be able to deliver the productivity improvements our sector and our country needs.
Because of infrastructure’s critical role in the economy, moderate improvements to our sector’s productivity would have significant positive benefits for the UK. If the construction sector could catch up to the productivity levels of manufacturing we would see an extra £100bn added to the economy resulting in £40bn of extra tax revenues. That’s enough to build 60 new hospitals or completely wipe out the UK’s budget deficit.
If the UK wants to succeed on the global stage post-Brexit we need to have a sustainable construction industry that can deliver the transformational projects we need and can directly contribute to our international exports. It will be interesting to see who steps up and leads the charge.
This article was originally published in Infrastructure Intelligence.