Simon Cross, Director of SiteSmart at BRE and a Member of the Construction Leadership Council (CLC), says increasing productivity – now more than ever as we lead up to Brexit – should be the sector’s number one priority in 2018.
The economic indicators point to a challenging 2018 for Britain in the lead up to Brexit in 2019. The OECD forecasts the UK’s GDP will grow by only 1% in 2018. Construction, which accounts for around 6.7% of the UK economy and employs approximately 2.9 million (circa 10%) people, therefore, has never been more critical to UK plc’s fortunes.
Construction, however, has its own set of challenges, some as a consequence of Brexit others due to its traditional business models and long-term lack of investment in skills, technology, systems and processes. Indeed, ONS analysis shows over the three months from September to November 2017, construction output decreased by 2%.
Brexit will surely exacerbate the skill shortages already being experienced as anecdotal evidence suggests much-needed skilled workers from Europe are leaving the UK to return to their homelands. Furthermore, Britain is not producing in sufficient quantities UK nationals, via apprenticeships, to replace them.
Given this gloomy scenario, driving productivity – i.e. the efficiency of converting inputs e.g. people, machinery or processes into useful or desired outputs – is critical not only to individual companies but also the nation as a whole lest we slide into economic stagnation and even decline.
So, how can construction improve its productivity and what’s the potential benefit of doing so? Let’s start with the latter. I believe the construction industry has the potential to be 20-40% more efficient which would significantly increase operating margins (contractors are less than 1%), provide R&D capital, and develop sector resilience.
How that’s going to happen is through a combination of policy levers and market forces.
1. Advanced industrialised manufacturing
The recent (November 2017) presumption by five government departments in favour of offsite construction across suitable capital programmes where it represents best value for money is hugely significant in real terms and as a signpost of the direction of travel.
Standardisation will improve efficiencies in time, labour, materials and waste. It is already stimulating investment, innovation, R&D, and encouraging disruption both from within our sector and by outsiders. The outlier could be an existing tech giant or a newcomer who transforms. I welcome them all.
New business models require a significant change in culture, business structures, supply chain models and behaviours. I believe this change requirement is largely underestimated in the construction sector. Only when an organisation demonstrates better performance through new business models will we see the change required.
Such new business models, as well as cultural shifts, are essential for an industry that detrimentally to productivity has for too long maintained the status quo. An expedited shift to advanced industrialised manufacturing will drive efficiencies through new systems and processes, lessen build times, and attract new talent.
Ultimately it will increase operating margins that could be reinvested in R&D and to enhance systems and processes that will continue the virtuous circle of greater efficiency, performance improvement and altogether better outcomes, including social and environmental sustainability indicators.
2. Digital technologies
The capturing, interpretation and application of data and the digitalisation of processes and systems to measure and benchmark KPIs drives productivity and profitability. It is an enabler and lifts up the sector to support growth and new business models.
The use of digital technologies (including BIM) analysis and decision making has been the digital catalyst within the sector. Now the industry has to accelerate its adoption across projects throughout the entire supply chain – not only within functional silos – and across the assets’ whole life cycle including post-occupancy and during maintenance.
BRE SiteSmart suite of tools – including YellowJacket and SmartWaste – help customers to measure affordable their data, KPIs and other characteristics of their construction sites and projects. Thus informed, they are able to make more agile decisions and improvements to increase their productivity and save money.
For example, when using SmartWaste, our data shows that construction projects become more efficient and save an average of £12,000 per project on waste alone via landfill taxes and associated recovery costs tied into circular economy models.
The SiteSmart tools’ measure the core KPIs of waste, energy consumption and transportation on construction sites, as well as related CO2 emissions, water use, timber procurement, health, safety, quality and process efficiency.
They have demonstrated that it is possible to build to a higher specification at no or minimal extra cost, when focusing on process efficiency, lean and offsite construction and similar productivity improvement measures. Data and digitalisation are the enablers of the step change.
3. Skills and training
Skills and training are essential to deliver productivity and increase profitability, and to meet the adaptation to an increasingly technologically driven workplace, including on construction sites.
For example, drones are regularly used on construction sites to aid project logistics and to guide automated bulldozers. 3D printing is used to manufacture building materials, components and even prototype whole buildings on site. Robotics is an increasing factor in the workplace; all require human skills at many levels.
All in all, it stands to reason that better qualified and trained employees and contractors will be more efficient, innovative and likely have a higher level of motivation. Individually and collectively these are characteristics that improve productivity and profitability.