Can the UK’s infrastructure pipeline be a catalyst for developing skills in the regions – rather than over relying on an itinerant workforce? CM talks to the author of the CIOB’s latest economic report.
Construction has long experienced major regional variations in workload. From 2013 to 2018, the greater south east – London, South East England and East of England – accounted for 45% of all construction output in Great Britain (see figure 2).
However, that is forecast to change over the next decade. London will still fare well, but some regions will enjoy a surge in construction activity (see figure 4), with Hinkley Point coming on stream, HS2 finally getting the green light and – further off – the Northern Powerhouse firing up.
Politically, elected mayors will be pushing growth agendas while Boris Johnson’s new Tory government will likely invest in their new blue constituencies in former Labour heartlands.
In short, demand for construction skills in the regions will rise significantly. The question for the industry is – how should it meet that demand?
Matching skills to local projects
Historically, peaks and troughs in construction workload have fuelled an itinerant workforce. Trades and professionals have moved wherever the work was. But that’s not necessarily a good thing for construction, the economy or society, argues Brian Green, industry economist and author of the new CIOB report The Real Face of Construction 2020: Socio-Economic Analysis of the True Value of the Built Environment.
“The construction industry should, at a regional level, match the resources to the skills that are needed,” he says. “If we are building more transport infrastructure in the North and Midlands, we should have the skills in those regions to deliver those projects.
“Otherwise, we will have an industry where the skills are always moving around. The big contractors who work on the Northern Powerhouse will parachute in project managers from the south, who have just come off Crossrail, probably on big wages.
“Alternatively, we can develop those skills locally. Construction can have a huge, positive impact at a local level. If project managers live near their work, you get the virtuous circle of their wages being spent locally and that money going back into the local economy. It’s also better for their family life, to be home each evening rather than away living in a hotel all week.”
At present, most regions are ‘net exporters’ of construction labour, where there is a difference between the number of people employed in construction in the region and the number employed in construction who live there (see figure 3).
The ability of workers to move region to region can be a good thing, as it helps smooth the impact of often volatile local construction markets. But it makes sense to try to balance the local labour force over time.
Wales is a prime example of this effect, with the suspension of the massive Wylfa nuclear power station project pushing Welsh construction workers to look outside their nation for work. At the other end of the scale, London, perhaps understandably, in 2018 had a net inflow of about 41,000 construction workers.
Further exacerbating the regional skills problem is the ageing construction workforce, which is far more pronounced outside of London.
But with the pipeline of work ahead, there is an opportunity to address this regional skills imbalance, says Green.
“Industry leaders should examine what sectors are growing and where the demand is – and ask themselves
how effective the industry is at delivering the right skills in the right places,” he says.
A recommendation in the report is the creation of specialist clusters, where regions become centres of excellence in certain areas of expertise (see below).
Offsite centres of excellence
Modern methods of construction (MMC) could be one example of this. In October, the government announced plans for a ‘silicon valley’ for offsite manufacturing in the North of England. The centre of excellence would aim to create a network of people involved in MMC and encourage them to share ideas and future uses.
“Clustering is currently popular among policymakers, the idea being to create hubs of excellence and ecosystems around certain activities,” explains Green. “In construction, regional specialists might be able take advantage of the local business culture and experience. For instance, offsite manufacturing has historically been strong in east Yorkshire because the caravan industry was based in Hull.”
A further advantage of clustering – and particularly MMC – is that it will reduce the number of itinerant workers.
“Sites move around, factories don’t,” Green says. “Creating MMC clusters in key regions can help create long-term, stable careers concentrated on specific skills sets.”
Establishing skills strategies tailored to regions also fits with the new devolved training funding regime, which is just kicking in. The Department for Education is transferring elements of funding to the mayoral combined authorities and the mayor of London to undertake adult education.
“This is an important and potentially positive move for construction,” says Green. “If more work moves offsite, there are major implications for training. CITB’s analysis into the impact of MMC on housebuilding suggests a major shift in skilled trades and manual occupations to working offsite.”
In this context, devolved funding priorities for construction training could be tied into a region’s clustering strategy, reasons Green: “There will be regional variations in demand for offsite skills that will relate more to where factories are sited rather than to where there are construction sites.”
However, the report’s regional vision for construction is very much dependent on the national policy framework.
“The report recommendations assume steady economic growth – but construction’s biggest two issues are volatility and uncertainty,” Green notes.
“The industry is much more volatile than the economy overall, but when there are large projects in local areas, the local impact is exaggerated. So, we need to understand how the national and regional context are related.”
“If project managers live near their work, you get the virtuous circle of their wages being spent locally and that money going back into the local economy.”
Brian Green, economist
And government policy is arguably more important to the future of construction today than for decades. Green reckons as much as 70% of new-build construction is dependent on government policy, so consistent, long-view decision-making is critical.
This is more likely to come about with an understanding of the industry’s real value, as indicated by the title of the CIOB report. Green’s analysis suggests that construction’s contribution to the UK’s GDP is probably double the figure of around 6% given by the Office for National Statistics, when the work of architects, engineers, product manufacturers and plant hirers is factored in.
“It all depends on how you define construction. As things stand, we take a very narrow view that doesn’t really match how people in the industry see construction,” he says. “When policymakers understand the true value of the industry, they will appreciate the importance of construction-related decisions on the wider economy and society.”
Brian Green’s report for the CIOB, The Real Face of Construction 2020: Socio-Economic Analysis of the True Value of the Built Environment, is available from the CIOB website: ciob.org
Clustering and construction
Policies could provide local and national economic benefits.
“Across many industries, one solution to generating improved performance has been to cluster businesses, which helps to stimulate innovation, create greater opportunities for networking and sharing of ideas, and open up greater scope for collaboration. This helps make regional companies far more effective in their local market as well as in the wider UK and overseas economies.”
This description of clustering is taken from Brian Green’s new construction economic report for the CIOB. He regards the idea as “particularly important in the context of increasing focus on offsite production and the push for greater innovation”.
Green believes that during a “period of rapid change” for the industry, policies promoting clustering would benefit both the wider construction sector, the economies of these regions and the nation.
“Local and central government should promote and support clusters of construction-related businesses to act as hubs of excellence and innovation,” he argues.
“Incentives, such as low rents or low rates, and services like business mentoring, that support development of the sector, should be provided for engineers, architects, surveyors, contractors, specialists and product manufacturers. These clusters should be near to and linked to centres of education and training.
“Now is the time to provide resources to nurture what looks set to become a significant job-creating, value-generating part of the construction industry and the overall economy.”
