Modernise or Die: does Government's response to Farmer Review achieve objectives?

Dramatic that by-line may have been but the review itself, produced for the Construction Leadership Council in response to a request from the Government at the end of 2015, substantiates and justifies that by-line. In the Executive summary Mr Farmer set out his stall in the following terms “The construction industry and the clients that rely on it are at a critical juncture and it is time to review the seriousness of the future outlook. Deep-seated problems have existed for many years and are well known and rehearsed, yet despite that, there appears to be a collective reluctance or inability to address these issues and set a course for modernisation”.

The Review started by identifying symptoms in the industry ranging from low productivity to poor industry image and making a diagnosis of three key underlying causes of the problems facing the industry, those being:

1. the industry has become “survivalist” due to low capital reserve and high demand cyclicality
2. the industry and its clients have non-aligned interests reinforced through the process of construction, and
3. there is no framework for institutional change and the problems have become accepted parts of the industry.

The review made a prognosis that “if action is not taken quickly [the industry] will become seriously debilitated”. The recommended treatment plan (following the medical analogy throughout) would need to recognise that “…based on past evidence, the industry will not change itself unilaterally at scale. It needs to be led by clients expressly changing their needs and commissioning behaviours or government acting in a regulatory or strategic initiation capacity to drive positive disruption”.

To carry out the treatment plan the Review made ten recommendations which were closely interlinked to achieve a step change in the approach of the industry.

On 19 July 2017 the government has responded to those recommendations. The responses, set out below together with a summary of the recommendation, seem to somewhat miss the point of the Review and the importance of the interplay between the recommendations. In endorsing some but not others the response may have undermined the broad and systematic change that the Review highlighted as necessary.

The First Recommendation was that the Construction Leadership Council should have strategic oversight of implementing the other recommendation. Government agreed and commented that it is keen to see closer working between the construction industry, its clients and government.

The Second Recommendation was that the construction industry training board be thoroughly reviewed and reformed. Government, with the help of Paul Morrell a formed Chief Construction Adviser to Government, reviewed ITB and concluded that it did need modification but should remain as a body.

The Third Recommendation was that greater emphasis be placed on research and development and shifting from traditional to pre-manufactured approaches. Government did not entirely agree, emphasising the importance not just of pre-manufacture but also in client-contractor relationships.

The Fourth Recommendation was around increasing access to and focus on innovation. The Government response was to agree with some emphasis on BIM. However, it went on to confirm that it will be working with the financial sector to ensure funding and insurance do not stifle innovation.

The Fifth Recommendation was that the CITB should focus more of its grant funding towards a modernised industry. The Government generally agreed.

The Sixth Recommendation was that the CITB should be more public facing “selling” the industry through exemplars rather than just maintaining the status quo. The Government response was to support the need for the industry to present a positive image and attract new talent to the sector.

The Seventh Recommendation was that the Government should recognise the value of the construction sector and intervene to support the establishment and maintenance of appropriate skills capacity. The Government response was to reference the Industrial Strategy Green Paper and confirm that it will look closely at any proposal for a “sector deal” for construction.

The Eighth Recommendation was that Government should provide an initiation stimulus to innovation in the housing sector very much focussed on pre-manufactured housing. The Government response references its commitment to £25bn to increase housing supply and its White Paper on Housing which sets out measure to stimulate innovation. In particular it highlighted stimulus for modern methods of communication, supporting joint initiatives to ensure mortgages are available for purchasers, review of the planning system, supporting pre-manufacture and off-site fabrication innovations.

The Ninth Recommendation was that a pipeline of demand for new build housing should be published along the same lines as the National Infrastructure Pipeline. The Government Response goes through a number of initiatives that are underway but there appears to be no mention of or commitment to the type of pipeline recommended.

The Tenth Recommendation was that in the medium to longer term if a voluntary approach does not change the industry approach then a levy should be imposed of not more than 0.5% of construction value to fund the modernisation of the sector. The Government response was that it thought such a levy could damage market confidence and therefore preferred to focus on making the other recommendations work.

As with other reviews of this type identifying issues that need to be addressed, a reader can be left wondering whether we are just travelling in a constant circle, making the same mistakes over and again. With the benefit of the Farmer Review and following the Government’s response, is the construction industry going to knowingly continue that trend? While the circle probably has not been changed in essence with the Government’s response it has, perhaps, been broken to a spiral. While everyone continues to feel like they are going round the same loop, it is actually changing, albeit by small increments rather than the step change advocated.