Who is going to be the Elon Musk or Jeff Bezos that disrupts the construction sector?

Property & Construction | Reports

To find out more about how the construction sector is performing nationally and what challenges and opportunities it is facing, Business Leader brought together a diverse panel of expert to talk about skills, innovation and the future of the sector.

Panel:

Sarah Jenkinson – Stride Treglown

Mike Pinney – CG Fry and Son

Paul Richards – Aquarian Cladding Systems

Gemma Day – Dowlas

Matt Tyler – Dowlas

Amy McCormack – ETM Contractors

Ed Khodabandehloo – Summerfield Developments

Dieter Wood – Interaction Ltd

Paul Williams – Avison Young

Kelly Di Notaro – Albert Goodman

Mike Cahill – Albert Goodman

Simon Brewer – Bridgwater and Taunton College

WHAT CHALLENGES AND OPPORTUNITIES ARE YOU SEEING IN THE CONSTRUCTION SECTOR?

Dieter Wood: “One of the trends we are seeing evolving fast is around sustainability. Our clients are increasingly seeing the climate and environment as a key stakeholder and there has been a change in appetite from our clients, from seeing it as a token box to tick to something that is now top of their agenda.

“40% of total carbon output in the UK comes from buildings and the realisation is dawning on business leaders that they can do something about this.

“It’s also worth noting that lots of funding that comes from abroad is looking at the environmental credentials of businesses.”

Ed Khodabandehloo: “Sustainability is becoming more of a focus for local authorities too and for results to be seen it needs to be a mix of both policy and client-led action.”

IS EMBRACING THE SUSTAINABILITY AGENDA SOMETHING THAT IS VIABLE FOR SME FIRMS, ALONGSIDE CORPORATES?

Dieter Wood: “I would say that the change is being driven by SMEs because in the long-term a business will save money by embracing a sustainable agenda. You can see a world where you submit your annual accounts and you must show how you’re contributing to tackling sustainability. When you’re pitching for work, clients are becoming increasingly interested in this side of your business.”

Paul Williams: “It’s also not just about the building itself though but how the building is used by the tenant. A developer can create a BREAAM A or B rated building but if the occupier doesn’t behave correctly when they are inside, you will undo lots of that good work.”

WHAT ROLE DO LOCAL AUTHORITIES HAVE REGARDING THE SUSTAINABILITY AGENDA?

Sarah Jenkinson: “Many of my clients are local authorities and private landowners and you tend to see much of the discourse is about quick wins and short-term profits. It can be quite difficult to get some of our clients excited about defining standards and the sustainability agenda, when working in this environment.

“That’s a big issue and it hasn’t been helped by central government removing the concept of central standards when it comes to the construction of buildings.

“Councils have set targets but aren’t necessarily aware of the how and how to deliver it. I think central government having defined targets around this would be very helpful both to businesses and local authorities and I think it would eventually wash through to the regions.”

Gemma Day: “A worry that I have is there is a danger that this type of thinking will happen in the city because it is being driven by policy and large clients but when you come out to the regions, this isn’t always the case.

“Sometimes when we are pitching to clients, they aren’t often talking about sustainability and price is still the biggest driver.”

GEMMA – YOU MENTIONED ABOUT OPERATING IN THE REGIONS – CAN YOU ELABORATE ON THE TYPES OF ENQUIRIES YOU’RE RECEIVING?

Gemma Day: “The region we operate in is so diverse that we get enquiries from many different sectors and this can make it difficult to brand an area or a business park and create a specific identity, whether that is as a science park of technology hub for example. You end up having to brand each part of the business park to appeal to different businesses and sectors.”

WHAT ARE THE CHALLENGES AND OPPORTUNITIES YOU ARE FACING AS BUSINESS?

Amy McCormack: “I would echo earlier comments about sustainability being pushed to the top of the agenda. For example, on the highways side of our business, we’re the main contractors for Bristol City council and we’re seeing a huge drive from the Council to use recycled aggregates which helps to reduce carbon emissions; and is also half the price of quarried aggregates.

“People talk about the cost of sustainability but often it is cheaper, and Bristol City Council has a huge drive to do this whereas BANES and North Somerset Council don’t seem to do so.

“Regarding our new zero waste to landfill plant, we’re seeing contractors putting environmental performance ahead of price – whereas it used to be the opposite.”

Kelly Di Notaro: “Regarding sustainability, from a tax perspective for businesses, creating clear processes around innovation and sustainability can give businesses an opportunity to mitigate this and it’s worth keeping an eye on this space.”

Paul Richards: “We import cladding from Europe – so we have had to deal with some significant headwinds such as Brexit and Grenfell. Post-Grenfell there has been an understandable clamour for non-combustible materials, together with a lack of understanding of how we got into this mess and how we get out of it.

“When I set the business up 15 years ago none of this was on the radar, so you don’t put this into your SWOT analysis.

“I’ve also been championing sustainability and using less materials in products for some time. I find that there is a huge investment and understanding in Europe about the benefits of sustainability and using materials that make a difference but not in the UK now, but this is starting to change.”

Mike Pinney: “We’re a builder/developer based in Dorchester with the biggest part of the business being High End Development Housing but with our increasingly successful Contracting arm we have a significant foot in both camps regionally.

“Environmental awareness is definitely high on the agenda and looming large, it won’t be long before you won’t be able to get on a tender list unless you can demonstrate your Pro-active environmental credentials.

“There is also a bigger issue around contractors and supply chains. Contractors are going bust weekly partly because client/consultant teams are putting too much of the risk onto them with too little reward in return which is passed down the line to subcontractors who suffer the same fate.

“I would also say that another issue is quality/standards, lobbying for lower standards has meant the removal of certain building standards leading to the current proliferation of cheap but poorly-built housing.”

HOW DO WE SOLVE THE ISSUE OF THE PRESSURE THAT IS PUT ON CONTRACTORS?

Matt Tyler: “It starts with the client – they get an idea of what their budget is, and this is often influenced by their consultants, not necessarily the contractor. This results in constant pressure to drive down contractor and supply chain costs throughout the project, which creates incredible pressure on all involved. There needs to be far greater collaboration with contractors at the outset of each project to manage those budgets.

“At 1% or 2% margin, if one client doesn’t pay you on, you’re on a knife edge. The construction sector has the highest failure rate in the UK with 3,000 businesses per-year going into administration.”

HOW DO WE SOLVE THE ISSUE OF SOME MILLENNIALS NOT WANTING TO FORGE A CAREER IN CONSTRUCTION?

Simon Brewer: “Attracting not just young people but also new entrants into the sector is important but the question is how we do this? The big success we’ve had as a college has been with the SME community and mainly on the biblical trades.

“We’re trying to bring down some of the issues around attracting and retaining talent and big infrastructure projects like Gravity and Hinkley Point have helped to do this by creating exciting opportunities for businesses and people looking to work in the sector.

“One caveat though is that it is very difficult for training providers to invest these days – because there isn’t as much money in the system as there has been in previous years.”

Paul Williams: “I believe there are huge opportunities here to inspire young people to enter the sector. Our sustainability and innovation team are looking at how technology is going to impact our business and we invest in small start-ups in the sector as this is what is going to drive change.

“We’re seeing lots of apprentices come through the business too. Typically, we used to have a graduate intake but this changing.”

Ed Khodabandehloo: “But to be honest it is very different if you are a large Canadian consultancy business and you’re looking to attract young talent, compared to SME business in the sector that is looking to find people to dig holes on site and lay bricks. This is where we are seeing labour shortages.”

Paul Richards: “It is an issue at the entry level and there is a school of thought where we get kids interested in Bob the Builder, then Lego and finally Minecraft before they leave the industry. This happens when they get to secondary school, which shows me that there is something in the education system that is dissuading them from wanting to pursue a career in this sector.”

Mike Cahill: “I think we’re missing a trick as the construction industry is fast-moving, design-led and it’s highly collaborative and you can earn good wages, but it really is about communication. You get lots of responsibility in construction too and you can be responsible for hundreds of people.”

WHAT WILL THE FUTURE HOLD FOR THE CONSTRUCTION SECTOR?

Paul Richards: “As a conclusion, in this debate we have talked about modern technology and how the housing model is broken and I am thinking if there is a space in the industry for an Elon Musk or a Jeff Bezos to disrupt and revolutionise it; with offsite manufacturing potentially being one of the levers to do this.”

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