The industry weathered the storm in 2021 – but it is far from plain sailing ahead. Access Construction looks at the pitfalls that await construction in 2022 and what not to do in order to not just survive but thrive
If you thought 2020 was bad, it’s safe to say few of us will be sorry to see the back of 2021, either.
After the initial shock of the pandemic and lockdown, construction rallied last year to get back to work on-site and, buoyed by pent-up demand from projects postponed in 2020, strong growth in housebuilding and a renewed focus on infrastructure development.
The January Purchasing Managers’ Index (PMI) from Markit and the Chartered Institute of Procurement & Supply (CIPS) showed job growth returned to the sector at the end of 2020, reflecting new orders and increased confidence. Half of the survey respondents forecast business activity would rise over the course of 2021, while only 10% predicted a decline, the strongest optimism across the construction sector since April 2017.
However, it has very much been a case of two steps forward, and one (and a half, sometimes) steps back for construction in 2022.
Supply chain disruption and rising material costs for construction in 2022
Supply chains, already creaking under the strain of galloping global demand for materials and Covid-related disruption to manufacturing and shipping, have struggled to cope, with increased demand and output proving a double-edged sword leading to higher prices and longer delivery times.
“There’s no doubt that construction has an image problem, from perceptions that it is all about being out on a windswept, rainy site and being seen as a route to employment for those who failed to get into college or university to it being an intimidating, even hostile, working environment for anyone who isn’t a straight, white male.”
With Brexit, haulage issues and a shortage of skilled labour adding to the complications for companies in the UK, the summer saw construction firms reporting shortages of cement, concrete, plaster, steel, timber and roof tiles, while input cost inflation rose to the highest rate since 1997. Almost 9 out of 10 (86%) of respondents to the PMI survey reported paying more for their goods in June.
By November, the BCIS Materials Cost Index showed building materials costs had risen to a 40-year high, with warnings that price pressures are likely to continue until the end of 2022.
The latest Construction Product Availability Statement, issued jointly by John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group at the end of November, cautioned that while the market is no longer experiencing the extremely high levels of demand seen earlier in the year and UK manufacturers remain at full production capacity, demand continues to outstrip supply for certain products – particularly those that are imported.
Commercial and housebuilding activity is strong for construction in 2022
Demand for residential repair, maintenance and improvement remained robust, with most SME builders reporting full order books well into 2022, although there has been a “small but noticeable” slowing in demand, which has helped to improve some stocks, such as cement, held by manufacturers and merchants.
Across the infrastructure, commercial and housebuilding sectors, activity is strong and is likely to remain so into the first half of 2022. While many larger housebuilders and contractors reported persistent shortages of products, the situation for most remains manageable.
Nevertheless, uncertainty remains a broad area of concern. This includes uncertainty over inflation and pricing, particularly around products such as bricks, cement and glass, which are all affected by rising energy prices. There is also uncertainty around potential spikes in Covid cases over the winter affecting product availability, the impact of full border controls due to come into force at the end of the year and the introduction of the new UK CA Mark and the UK Registrations, Evaluation, Authorisation & Restriction of Chemicals regulations.
Navigating all these issues in the year ahead will be challenging for everyone – but even if we could wave a magic wand that would solve supply issues, lead times and border delays in an instant, the construction industry is hampered by longstanding, you might say structural, issues that need to be addressed.
Construction in 2022 skills shortages
Construction generates around £90bn annually (almost 7% of GDP) and employs more than 2.9m people, the equivalent of around 10% of the UK workforce.
Yet despite these credentials as a powerhouse of the economy, skills shortages remain a persistent issue. The sector lost 140,000 jobs after the economic crash of 2008, and the situation is exacerbated by an ageing workforce hanging up their tools – almost a quarter of construction workers are over 50 and 15% are over 60.
In June, the Construction Skills Network forecast that the industry will need to recruit 216,800 new workers by 2025 to meet demand.
While it is good news that jobs are being created, the sector has struggled for many years to attract young people as an engaging, dynamic and modern career choice.
Commenting on the Construction Skills Network figures, Steve Radley, policy director of the Construction Industry Training Board (CITB), said: “We need to adopt new approaches to meet these growing skills needs and deliver these quickly. We are working closely with the government and FE to build better bridges between FE and work and make apprenticeships more flexible. We are also making significant investments in supporting work experience that make it easier for employers to bring in new blood.
“We must also make sure that we invest in the skills that will drive change and meet new and growing needs such as net zero emissions and building safety.”
But the statistics show the scale of the challenge. According to the Federation of Master Builders, of the 15 key trades and occupations it monitors 40% are experiencing skills shortages.
Furthermore, research from YouGov Omnibus shows only 3% of people aged 18-24 have searched for a job in construction. The CITB’s own data shows the appeal of construction as a career option is low, scoring just 4.2 out of 10 among 14 to 19-year-olds.
On top of that, only 15% of the construction workforce are women and just 6% come from BAME backgrounds and 6% have a disability.
There’s no doubt that construction has an image problem, from perceptions that it is all about being out on a windswept, rainy site and being seen as a route to employment for those who failed to get into college or university to it being an intimidating, even hostile, working environment for anyone who isn’t a straight, white male.
“After the initial shock of the pandemic and lockdown, construction rallied last year to get back to work on site and, buoyed by pent-up demand from projects postponed in 2020, strong growth in housebuilding and a renewed focus on infrastructure development.”
Are all of these perceptions fair? Of course not. And a significant amount of progress has been made – Willmott Dixon, founded in 1852 and one of the UK’s largest contractors, has been named in The Times Top 50 Employers for Women for the past two years and, more widely, there is a growing recognition that improving equality, diversity and inclusion is not about box-ticking or, whisper it, “wokeness” but about having a greater talent pool, bringing different ideas to the table and better representing the society that the industry serves. The built environment is, after all, for and used by everyone.
One of the best ways to tackle misconceptions about the type of careers and working environment construction offers is to demonstrate that it can be a sector that reflects the world young people are used to.
They are digital natives – someone born in 2000 doesn’t remember dial-up connections, never mind any internet at all. They are used to superfast broadband and smart tech.
Construction has sadly lagged behind other sectors in the digital transformation stakes – and lost out on much-needed talent as a result. But the technology is there, from BIM and digital twins to drones, AI, machine learning and AR/VR – and it is becoming increasingly accessible.
Indeed, according to a recent article in Forbes examining the data analytics landscape, International best-selling author and futurist Bernard Marr argued that the barriers to entry for technology are falling all the time an “the biggest barriers to benefiting from advanced analytics are certainly now organisational rather than technological”.
Ultimately, construction companies have to be the change they want to see in the industry.
Embracing technology will help to attract the young minds and skills needed to not only address the skills shortages of today but to adopt the modern, sustainable methods of construction needed for tomorrow.
This is not changing for the sake of it; the bottom line is that, in light of COP26 and the UK’s push to net zero targets, not to mention stronger regulation of areas like building safety and construction product quality, change is coming anyway and technology will have a bigger and bigger role to play – get ahead of the curve or get left behind.
Speaking of the bottom line, this is another key area where technology and digitisation can have a positive impact.
For despite construction’s standing as one of the pillars of the UK economy, the shocking fact is that most of the companies working within the sector are surviving on razor-thin margins.
Research by the Confederation of British Industry published in February 2020 shows that every £1 spent on construction generates £2.92 of value for the UK.
Yet while the UK average for profitability across all industries stood at 17.9%, the largest 100 contractors in construction made an average margin of just 2.6% in 2018 and the industry routinely suffers more insolvencies than any other sector.
Sustainable margins and better cash flow are essential for construction in 2022 to survive
More sustainable margins and better cash flow are essential to not only day-to-day business survival but also creating greater trust between firms and clients, changing the industry’s adversarial, dispute-heavy culture – something identified by Dame Judith Hackitt in her review of building regulations and fire safety as being essential to producing safer buildings.
In addition, improved margins mean more money – potentially hundreds of millions of pounds industry-wide – to invest in research and development, training and innovation.
Construction technology
Again, construction technology is already available to contribute to more efficient, productive and ultimately profitable work. This could be 3D design and offsite manufacturing that ensures precision-engineered buildings or using VR/AR and digital twins to visualise a building from the design stage, eliminating costly rework before a spade hits the ground, right through to monitoring its operation and use in real-time.
Technology can also enable decisions to be made much faster based on accurate, reliable data. Despite all the advances in construction techniques and processes, many in the industry are still relying on manually maintained spreadsheets for critical information.
Yet according to the European Spreadsheet Risks Interest Group (EuSpRIG), research shows around 90% of spreadsheets contain errors. Spreadsheet users, however, tend to be overconfident and 90% believe their documents are error-free. As a result, they are not inclined to look for problems and spreadsheets are rarely tested, meaning the errors remain.
EuSpRIG said around half of spreadsheet models used operationally in large businesses have “material defects”.
The ripple effects from a seemingly innocuous mistake – a misplaced date, cell or decimal point – can have major consequences for a project’s progress, budget and deadline.
Add to that the fact that different firms working on the same scheme – or even different departments within the same company – could be working on their own, uncoordinated spreadsheets and the potential for costly problems are clear.
Construction generates around £90bn annually (almost 7% of GDP) and employs more than 2.9m people, the equivalent of around 10% of the UK workforce. Yet despite these credentials as a powerhouse of the economy, skills shortages remain a persistent issue.
Access Construction ERP platform, EasyBuild
Here’s where tech can step in. Software such as ERP platforms, like EasyBuild from Access Construction can eliminate human error by automating processes and provide a centralised, unified and secure source of truth for all users that are always up to date.
This provides visibility, accuracy and control across a project, from supply chain and materials management to updates and feedback from the site being fed back via mobile devices in real-time, helping to limit unnecessary expenditure and highlighting potential problems before they become major delays.
The Solutions Are Out There – So What is Holding You Back? There is often a perception that digital transformation requires massive investment in tech infrastructure but this does not have to be the case, especially with options like cloud hosting. A partner like Access Construction can help you identify your digital priorities and translate them into a solution offering greater capacity, improved performance and enhanced security.
And the fact is, once we move forward with technology at work or at home, we rarely look back – do you miss the days before mobiles, email or laptops? Well, maybe sometimes! But the benefits they have brought us are undeniable; they offer solutions to problems and that is why they have become so integrated into our lives.
To be sure, 2021 has been a challenging year and there will be even more potential pitfalls for construction in 2022. None of us can stand still if we want to avoid those pitfalls and capitalise on opportunity. Technology can help to keep you on the right road. Start your journey now.
Access Construction has two core products written for the construction industry – ConQuest Estimating and EasyBuild ERP software. They offer a full-service, comprehensive solution that will take your construction firm to the next level giving you visibility of your products from start to finish, control over your costs and accuracy over your data.
Get in touch to book a demo or request a call from one of our construction software experts to see how your company can avoid pitfalls ahead for construction in 2022.
Content from The Access Group’s ebook Pitfalls for Construction in 2022.
