Written evidence from the Construction Products Association (ISP0024)

  1. The Construction Products Association (“CPA”) welcomes the opportunity to respond to the inquiry. We represent the UK’s manufacturers and distributors of construction products and materials.  Our sector directly provides jobs for nearly 330,000 people across more than 22,000 companies and has an annual turnover of £56 billion, accounting for more than one third of total UK construction output every year.  The CPA represents 87% of the industry by value, and is therefore its leading voice.

 

  1. We appreciate the Government’s renewed commitment to developing a modern Industrial Strategy and the announcement of a forthcoming sector deal for construction, both of which should instil confidence in our manufacturers to invest further in plant, technology and skilled labour, thereby increasing productivity and local capacity for the sector.

 

  1. The construction sector has great potential as a key enabler of UK economic growth, and given the recent downgrade from the OBR for UK productivity this takes on a greater urgency. The newly announced sector deal for construction will be crucial for the whole supply chain over the coming years, especially if we are to help Government achieve its aims of building more homes and improving the UK’s infrastructure.  In addition, given the risks around skills shortages and productivity weakness, we support Government’s much-needed boost to improve digitalisation and construction skills.
     
  2. Critical to the success of any sector deal for construction is effective leadership within the industry through the Construction Leadership Council (CLC).  Unfortunately, the CLC is disproportionately weighted towards large builders and consultants and therefore does not best reflect the wider industry it aims to represent.

 

  1. Approximately 80% of all construction products used in the UK are made in the UK – this reflects a sector that plays a central role in nearly every construction project in the country.  CPA members therefore underpin every part of our built environment and are an essential contributor to a functional, productive and modern society.  A list of our members can be found on our website.

 

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  1. Our submission addresses a few of the Inquiry’s questions and makes the following key recommendations, which we believe will improve productivity and drive growth:
     

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Q. How do you engage with the Government to secure industry-wide deals?

 

  1. The submission to secure a sector deal for the construction industry was led by the Construction Leadership Council (“CLC”), created in 2013 and reconstituted in 2015 with 12 members drawn from leading construction firms in the UK.  The Department for Business, Energy and Industrial Strategy has a permanent seat on the CLC.  The primary aim of the CLC has been to work between industry and Government to identify and deliver actions supporting UK construction in building greater efficiency, skills and growth. 

 

  1. Aside from providing secretariat support for the Green Construction Board (one of six workstreams of the CLC) the CPA does not have a formal role within the Council.  However, through our longstanding relationships with both BEIS and some of the members of the CLC, as well as our input to other workstreams, the CPA was able to contribute into relevant elements of the sector deal submission. Nevertheless, we feel that our experience engaging with the CLC and contributing towards securing a sector deal has highlighted a key issue.
     

 

  1. The CLC is disproportionately weighted towards large contractors and consultants. The sector make-up of the CLC does not accurately reflect the wider industry it aims to represent, particularly as manufacturing accounts for approximately one third of total construction output per annum and yet only one UK manufacturer sits as a Council member.  In addition, other sizeable sectors are not represented, such as sub-contractors and small builders, plant and tool-hire suppliers. 
     
  2. As a result, we believe the capabilities of the CLC are inherently limited, with a risk that the perspective, knowledge and interests of manufacturers are absent either in the outcomes of the sector deal itself or in the ability of the CLC to effectively engage with this third of the UK construction industry during the deal’s implementation.
     

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Q. What do you expect the Government to deliver and how is progress measured?

 

  1. It is important to point out that, at the time of this submission to the Committee, the final sector deal for construction has not been published or made available to us in draft form.  What the CPA has available to reference in this submission is the two page summary from the Industrial Strategy Whitepaper (pgs 197-198) released by the Government in November 2017.  As a result, we are somewhat limited in our ability to suggest criteria for delivery and measurement.
     
  2. As the largest procurer of construction services in the UK, we expect that the Government will ensure that manufacturers and distributors are invited to make a more significant contribution to the CLC.  More broadly, we strongly encourage Government to see that what has been announced is not harmed by the Brexit transition period and the UK’s post-Referendum deal once it has been finalised.
     
  3. The Government has already acknowledged that it recognises its strategic power and   leadership role, not only for sector deals but for funding and regulations.  We expect, therefore, that it will be willing to take risks and make long-term investments whilst coordinating and convening efforts to develop and disseminate new policies, technologies and industries.
     
  4. The Industrial Strategy Whitepaper identifies a number of existing or future projects and activities in support of its Strategy that are very relevant to the construction industry but not specific to its sector deal proposition, which we nevertheless believe are critical to the health of UK construction whilst the sector deal gets underway.
     
  5. Of primary importance in this regard is the National Infrastructure and Construction Pipeline, a forward-looking pipeline of planned projects and programmes in economic and social infrastructure worth around £600bn.





     
  6. The CPA commends the Government’s Pipeline and accompanying National Infrastructure Delivery Plan for encouraging longer-term planning for skills, materials and plant investment in the infrastructure sector.  The Government, as the client, always needs to offer the industry clarity and confidence about its plans.  Simply put, before industry can strategise and plan how to grow its business it must understand the size and shape of the market, and where that market is actually being delivered.

 

  1. However, we believe it essential that the Pipeline continues to improve the depth and breadth of its data; for example, by capturing even wider information about major housing and commercial developments.  More importantly, the Government must do everything it can to ensure clarity about its intentions and timely delivery on the ground. Ultimately, the Pipeline must be seen to accurately reflect what is actually happening and not as a “wish list”, and the Government must be seen to deliver on its announcements.
     
  2. A number of plans were otherwise announced in the Whitepaper, which we expect the Government to deliver in partnership with industry, including the sector deal and the Industrial Strategy Challenge Fund; T-levels and STEM-learning investment; National Productivity Investment Fund; et. al.

 

  1. In addition, the sector deal for construction, the first of a series the Government intend to negotiate with the construction sector, also contains commitments to work collaboratively in three key areas:

 

 

 

  1. Regarding how progress will be measured on all of the above, we believe the CLC’s workstreams have already begun to investigate such matters and will shortly be broadening their need for further industry input.   Our thoughts at this stage include:
     
  2. Typically, performance of a built asset can be appreciated in terms of its delivery and capacity of services, the reliability and quality of those services and the project’s impact on the end-user and community (e.g., social, economic and environmental impact, quality of life, public health).



     

 

  1. In addition, regulatory standards and codes, as well as procurement and design guidelines, serve as useful measures to make performance assessments.  However, such measures can change over time given new influences on and unforeseen impacts.  For example, we fully expect the impact of the Grenfell Tower tragedy to change certain procurement and performance expectations.

 

  1. Amongst such changing expectations is the growing appreciation for the ‘whole life value’ of products and projects.  UK construction product manufacturers, for example, invest significant time and money into reducing the environmental impact of their products and materials, providing third party accreditation and undertaking local hiring, training and supply chain initiatives that have a meaningful impact on their communities. Such work and expense are not undertaken by most overseas companies simply importing into the UK.

 

  1. To ensure that infrastructure projects are procured not just on lowest cost but also recognising the value of sustainability – environmentally, economically and socially – we expect Government to demonstrate that it will now embed ‘whole life values’ into its procurement decisions.
     
  2. We believe that this new balanced score card approach has such promise that we are recommending Government commit to this for all of its construction spend, and that Government asks major clients to do the same.  Given its strength as the construction industry’s largest client, once Government implements such an approach, the industry will follow and correspondingly invest.  This would ensure that all Government projects attract UK manufacturing investment, deliver supply chain performance and whole-life value of the final asset.
     
  3. More generally, procurement reporting needs to make a clear shift from anecdotal to evidence-based measurement, to ensure that not only are Government departments are held accountable.

 

  1. Regarding performance measures and models for other sectors of construction, such as housing or commercial buildings, we would caution that an approach developed and utilised for the infrastructure sector may not be appropriate for the housing sector.  Measuring the adoption of “smart construction” processes in housing, for example, is likely to be different in key ways from that of major infrastructure projects.
     
  2. We believe that progress for a sector deal for construction should not be measured by additional institutions or “shiny new centres”.  The resources necessary for the UK construction industry to achieve the ambitions of the Industrial Strategy largely exist already and only need to be improved upon.

 

  1. A greater emphasis should instead be focussed on the flexibility to push investment further down and across the supply chain and address the barriers of those parties using the centres and technology and expertise on hand.

     

 

  1. It is also important that the deal is not seen to be focussed on benefitting only a single sector such as infrastructure, at the expense of other sectors.
     
  2. Similarly, any measurement of success must recognise the many players involved and working towards the deal’s aims.  Performance, however, as measured by skills proficiency, productivity or investment will differ substantially due to varying production structures and economic conditions.  The impact of Brexit may also create distortions in the market.  All of this should be taken into account when determining sector-specific targets and defining desired outcomes.

 

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Q. What aspects of sector-based deals will help to increase productivity?

 

  1. The CPA believes the greatest potential for increasing productivity are in aspects which address the under-investment in digitalisation, innovation, capital and skills.
     
  2. UK construction product manufacturers are best placed to leverage their inherent productivity and skills advantages to support the wider UK construction industry to modernise and be less exposed to labour shortages.  As a result, this industry should be allowed to play a significant role in the Construction sector strategy:
     

 

 

  1. Through a combination of digitalisation, automation and optimised manufacturing-led supply chains, the CPA’s own analysis suggests that the sector can grow over £30 billion by 2025, assets can be delivered over 30% cheaper and 40% quicker, and the trade gap can be reduced to 50% by 2025 whilst supporting employment growth in the sector and wider economy.


     
  2. To its credit the construction sector is now accelerating its own adoption of these technologies and embracing the new opportunities they enable and the benefits they provide.  The sector deal would support and boost that progress.
     
  3. Of particular note, the priority areas for science, research and innovation investment for the Construction Leadership Council which support the sector deal, for example, are:
     
  1. Innovation and smart construction has the potential to transform productivity of the construction sector, improve capacity and improve the quality and performance of the buildings we produce.  This would benefit the construction industry, building clients and users – home-owners, tenants, pupils, patients.  It will stimulate growth of the UK economy and improve social challenges such as the UK housing shortage.
     
  2. Innovation and smart construction will help the construction industry be more productive by making better use of materials and labour to deliver at speed.  It will increase capacity allowing more buildings to be built.  It will improve the quality and performance of buildings in important areas such as energy efficiency and building comfort. 
     

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Q. Are there measures other than investment that can make a difference??

 

  1. We believe three efforts can be made in this regard:
     
  2. World-class BIM leadership:  Ensure that the UK’s position as a leader in digitalisation of construction is supported on the world stage; critically, continuing involvement in the development of European and world standards and methodology.  The international adoption of methodologies aligned to those developed in the UK is immensely valuable for UK business.

 

  1. Ongoing vocal support and thought leadership for the construction product sector:  Championing the UK construction product sector, as well as continuing to provide the thought leadership and consistent national voice for digital support beyond BIM.  Giving support on the national stage to the construction industry and its digitalisation provides momentum and leverage with other parts of the economy and its customers.  Continued non-financial support is critical.



     

 

  1. Promote leading edge technologies:  Development of leading edge initiatives is critical and many projects are being developed through Innovate UK.  To ensure the UK keeps its prime position, further technical developments are required. Materials and products can then identify maintenance or replacement requirements.

 

 

26 January 2018