How the UK construction industry is bouncing back

October 19, 2020

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Covid-19 has taken its toll on construction sector productivity, but as Fieldfisher construction specialists Cecily Davis, Dan Preston and Helen Andrews explain, the industry is adapting positively to changes in working practices brought about by the pandemic

When the nationwide Covid-19 lockdown came into force in March 2020, the UK construction industry was caught off-guard.

While construction sites in England were allowed to continue operating during the lockdown, the reality of keeping sites running proved to be a major challenge for many contractors.

The pandemic revealed the need to accelerate initiatives that the UK’s construction industry was, or should have been, putting in place before Covid-19.

The government’s furlough scheme and repatriation of migrant workers illustrated the sector’s vulnerability to labour shortages and supply chain disruption.

However, this lack of access to labour and materials forced the industry to become more resourceful. New approaches include more sophisticated workforce planning, making better use of more Modern Methods of Construction (such as offsite manufacturing) and greater digitalisation of site plans and supply chains.

Streamlining sites

The stripping back of project teams necessitated by the pandemic revealed the top-heavy and potentially inefficient nature of many construction workforces.

Importantly, this is not about cutting construction jobs but rather deploying them more efficiently and in ways that are more adaptable to future lockdowns/other kinds of disruption.

Anecdotal evidence indicates that having fewer layers of management present on sites during lockdown was generally well-received by subcontractors, who felt trusted to get on with their jobs.

Meanwhile, smarter use of technology – including cameras, sensors and data collection – meant project managers could scan a site from a desk to check on progress and productivity.

Smart systems also help managers spot issues early and communicate quickly with the relevant personnel to understand and rectify problems.

Using technology to strengthen the sense of connection between workers and projects, and simultaneously giving clients greater virtual visibility of various activities on site, also aids project teams to achieve the desired outcome first time around.

Before the lockdown, suppliers and supporting trades complained about congestion on some sites where too many subcontractors were on site at any one time.

Infection control measures limiting the number of people allowed to be on site have therefore not had such a negative effect on productivity as may have been expected, as subcontractors have more freedom to complete tasks.

Supply chains

The sudden imposition of lockdown measures highlighted how little stock construction sites and suppliers hold in the UK.

While there have been calls to address the issue of precarious inventories, this is a difficult challenge to solve because much of the manufacturing capacity for construction materials has moved offshore.

Repatriating elements of the supply chain will come at a cost and the industry needs to be prepared to pay the additional expense of having local sourcing options if it wants to maintain supply security.

Supply chain margins are also extremely tight and the lockdown may have made the construction industry appreciate that having such little wriggle room is not sustainable in the long term.

Improving productivity

Reducing reliance on labour should yield greater productivity gains in the future but there will still be a large labour component to the industry for the foreseeable future.

If Covid-19 is here to stay, construction industry leaders have a responsibility to make sure people can work in virus-free environments – part of which relies on better workforce planning.

Offsite manufacturing has huge advantages in terms of reducing congestion on sites and enhancing productivity, particularly in the student accommodation sector, where one module tends to be one unit.

In other markets, such the build-to-rent sector, there are slightly fewer advantages to offsite methods because these require more modules to make up one residential unit, meaning more work needs to be done on site.

More competition in offsite manufacturing will also drive quality improvements and reduce costs further. If these prove persuasive, over the next two-to-three years, the industry could see a major shift towards volumetric modular solutions.

Finances and fair returns

The pain caused by poor payment practices throughout the whole supply chain became extremely evident during lockdown, as did the lack of progress on issues such as abuse of cash retention.

Contractors holding money as working capital prevents cash from flowing down the supply chain; this is a real problem for small subcontractors and suppliers, who find it much more difficult to get credit than large contractors.

Despite various consultations and discussions about how to improve payment practices – for example, by introducing a scheme similar to that in Canada where it is compulsory for all retention monies to be held on trust, or introducing project bank accounts – so far, no meaningful steps have been taken.

The requirement that companies and LLPs over a certain size must comply with the statutory reporting duty for payment practices and performance sent a good message when it was introduced in 2017 but now appears to have lost much of its influence.

Proposals to introduce project bank accounts have had a mixed reception from the industry; while small suppliers are keen on this idea, finance providers are nervous about losing control and potentially being unable to stop payments if something goes wrong with a project or supplier.

Again, the solution to this is likely to be technological, rather than legislative, as it becomes easier to pay people using mobile devices and apps – linking supply chains together digitally.

Helen Andrews