Modernise or Die. This was the stark choice given to the construction industry by Mark Farmer in his report, commissioned by the Construction Leadership Council and published in October 2016, that sought not only to highlight the issues faced by the sector but also to make recommendations at a strategic level that would enable its ongoing survival. The result was an agreement to sector-wide reform and as one of the very first Approved Training Organisations, we look at the legacy of issues that prompted the report and what we hope the changes will deliver for British construction.
Although it may seem melodramatic on the face of it, those who have been in the construction industry for any great period of time can attest that there are serious challenges to be faced: a legacy of failure to embrace innovation, a fragmented industry structure, economic uncertainty, unpredictability of demand and a chronic skills shortage.
Whilst this list presents some of the usual and familiar suspects that have been long been cited as contributing to the fragilities of the sector as a whole, the final issue is a relatively new one. To put it bluntly, Farmer finds that based on the current age and demographic of the existing construction workforce and assuming that new entrant acquisition levels of today are maintained, there’s a very real risk that within the next ten years there will be a deficit of between a fifth and a quarter of available skilled labour to carry out construction work. A crisis point indeed.
But does this matter?
The answer is a resounding ‘yes’ as it has serious implications ultimately for the bottom line of UK PLC; a construction industry suffering from a capacity shrinkage is going to be incapable of providing the levels of GDP we are used to seeing – and indeed that fiscal decisions are based upon – given that construction as a collective industry accounts for 6.1% on average of GDP, worth more than £90m last year.
An Incentive for Government
A construction industry in crisis is certainly not going to be able to deliver the challenging target set by parliament and embedded in policy to build one million homes by 2020. In fact, skilled labour availability was identified in the Arcadis Paper, People and Money, specifically as being the biggest constraint to achieving that.
Additionally, there are implications on wider government strategy: the construction industry is instrumental to maintaining the existing, and delivering new, crucial social and physical infrastructure relied upon by other sectors to carry out their core functions in terms of homes and other built assets.
It would be safe to assume that it also matters to the 2.3 million people currently estimated to be employed within the sector, a proportion of whom may not be suitable for alternative employment and therefore could otherwise be drawing on the state welfare bill.
So, it is clearly in the interests of the government to pay heed to the warnings set out in Mark Farmer’s report.
Indeed, it acknowledges Farmer’s concerns and sets out in their response a series of commitments to specifically address his recommendations through wider sector reform to help shape policy development.
Included amongst these are measures to address issues such as low innovation and productivity by publishing a Housing White Paper that supports the £25bn investment in new homes to be supplied by a range of methods, including off-site and pre-manufactured approaches and encourage a more integrated way of working.
The Accelerated Construction programme specifically has been provided with £1.5bn investment in order to make the best use of public land for home building and the Build To Rent sector has received funding to stimulate private investment in the housing market. In turn, these should lessen the dependency on traditional construction methods whilst helping to stabilise demand and provide businesses with the confidence to invest more heavily in new capacity and innovation.
These are all welcome measures and government support is much needed to influence the scale of change that Farmer called for.
The cornerstone though of the transformation required is a review of the strategic framework of the construction industry – and in particular of the Construction Industry Training Board (CITB) – to address the skilled labour shortfalls that are arguably the biggest risk to the sector.
Using an analogy of initiating a chemical reaction to describe the process required to instigate wholesale, industry-wide change, with the government as the initiator of that reaction, Farmer identifies the review of the CITB as the intermediate or the enabler of that reaction.
A Step Forward for the Industry
Clearly, as providers of training services, this is music to our ears and news we’ve been wanting to hear for some time. We talked about the importance of training more generally in our previous article post and Farmer’s report highlights specifically how training – in terms of both delivery and strategy – is instrumental in driving the shift-change needed to transform the construction industry and future-proof it for the next generation and beyond. We agree that a reformed CITB is essential to achieving this and have already been proactive in helping to shape some of those reforms, implemented this April, and part of a wider programme of change under the Vision 2020 plan.
Of particular interest to us is how the reforms benefit employers and we’re pleased to note that the concerns raised by Farmer – and echoed by businesses in consensus – are being addressed to make training more accessible, the funding fairer and to provide assurances around the quality of training available.
A key new introduction that underpins these objectives is the creation of a recognised CITB Approved Training Organisation (ATO) status that construction training partners can attain by demonstrating that they meet stringent, defined industry standards. There are multiple benefits to this.
For employers, it addresses concerns relating to the value of training their staff receive, highlighted not only by Farmer but also expressed during the more recent consensus process of 2017 in which nearly half of employers were ambivalent to the consistency of training and equal numbers unconvinced that training delivered meets their needs based on the previous training model.
This is of particular importance to smaller and micro businesses who are, according to the consensus, less likely to see training as an investment and rather an upfront cost. Given that these types of businesses account for just under a fifth of construction enterprises, far more than any other sector in the UK, according to a study by the Department for Business, Innovation and Skills, it is crucial that they are being listened to and supported.
The creation of the Construction Training Directory, an online register of all CITB-approved ATOs makes training more accessible to employers by enabling them to search directly for providers by geographical location, price and availability. Not only will this assuage the 49% of businesses that were previously unconvinced that the CITB helped them to find information on available training; but having better access to information can also aid better planning, and therefore additionally support the 50% of employers who stated that they would have provided more training to their staff if they’d had more time to do so.
There are equal advantages to training providers themselves: essentially the Construction Training Directory acts as a marketing tool in highlighting the organisation as one that has met, via a rigorous evidence-based process, exacting industry standards and classifies them, by default, as recommended by the CITB and enables them to be found by employers. We would encourage training providers to apply for ATO status and while it might initially seem counter-intuitive from a competitive point of view, we believe it is in all of our interests to increase efforts in raising standards within construction right across the board.
Another radical change is the development of the Construction Training Register which records construction training and qualifications at an individual level. As a result, employers will have far greater visibility of the transferable skills of their staff and – significantly – of new recruits. There will be less duplication in terms of claims for the same delegate by holding this information at employee level, an issue with the historical process, which again will be of particular interest to smaller businesses.
As the ‘tail’ of the industry, they are more likely to be actually delivering construction work (as opposed to managing it) and are “often left ‘holding the baby’ in an [economic] downturn”, exacerbated by low post-qualification retention and in a perpetual cycle of training staff and recruiting new ones, according to Farmer’s findings and reinforced by consensus, and therefore less well-placed to recover in more favourable economic climes.
The Construction Training Register will, over time, provide a comprehensive national view of training across the sector and enable the CITB to accurately identify where to best target funding.
Bureaucracy was an issue brought up at consensus and one which the ATO process addresses; any organisation listed as an ATO is part of the automated grants scheme. So, as soon as a delegate has completed training, confirmation that a qualification has been gained is uploaded by the ATO and the associated grant automatically issued to the employer, streamlining the process and removing the need to dedicate a member of staff to manage the grants process specifically within a business. This again was a particular barrier to smaller enterprises that could not afford to dedicate staff to this specific activity.
What Does the Future Hold for Construction?
These reforms are welcomed, and we fully support the CITB in driving the radical change needed and we will continue to be proactive in helping to shape the ongoing process as the organisation moves through its 2018-2021 plan.
We are pleased to note that within this, Training and Development will continue to be the recipient of the bulk of industry money, collected via the member levy, with £613m to be spent over the course of three years and £3m specifically to be invested in developing an evidence base to gain a holistic view of the skills requirements across the entire sector.
Previous allocations of funding have been criticised in the past, with Farmer finding that for 2015, only £140m of the total £180m CITB levy collected being issued back to businesses in grants. He also observed that these relatively low values for a £100bn industry which employs more than two million people to be worryingly disproportionate so these changes to funding are welcome indeed.
The commitment from government, should it be sustained as planned, to drive and support the scale of reforms required is critical to the success of the transformation of the industry. The National Housing Taskforce in collaboration with the All-Party Parliamentary Group for Housing and Planning will look explicitly at issues surrounding housing supply in the UK which brings a much-needed, more joined-up approach and will seek to bring a cohesive strategy that the industry so badly needs.
There are many challenges still to face – and that we shall undoubtedly cover in future articles – such as the high levels of self-employment within the sector which, at over 40% represents a far higher proportion than any other industry in the UK; the implications of the impending withdrawal from Europe and the resulting lack of migrant workforce to draw upon to fill skills shortages, a particular issue for the South East of the country; and how we need to introduce measures to incentivise innovation within the industry in general but the CITB reforms are a good start.
Sarah Beale, appointed as Chief Executive of the CITB following the Farmer report, actively seeks input from sector partners and presents a refreshing approach and strong leadership to finally address the issues within the industry that will, if unchecked, lead to its “inexorable decline” as feared by Farmer. Her rallying call, inviting us and other industry stakeholders to “hold [the CITB] to account. And let this be the start of a new conversation about how we can continually improve to help…build a better Britain” is exactly what the sector needed to hear.
Evidence of change so far is reassuring, and we look forward to continuing to play our part, in our role as an ATO and as a specialist training provider, in shaping the vision for the future of the construction industry.