A tax for housebuilders who refuse to modernise?

Perhaps the reason why the industry can’t attract young blood is it is stuck in the past. October 17, 2016 / Isla MacFarlane

A new, headline-hogging report has warned the housebuilding industry that it needs to get with the times. The Farmer Review of the UK Construction Labour Model actually says very little that hasn’t been said already, but advocates a radical new approach, which goes so far as to suggest a tax on companies which favour traditional housebuilding methods.

Farmer pulls no punches when he says that the industry must ‘modernise or die’. The report highlights the construction industry’s dysfunctional training model, its lack of innovation and collaboration as well as its non-existent research and development (R&D) culture.

“The construction industry is in dire need of change,” said Mark Farmer, chief executive of Cast and author of the report. “With digital technology advancements pushing ahead in almost every other industry and with the construction labour pool coming under serious pressure, the time has come for action.”

One recommendation set out for the medium term is a ‘carrier bag charge’ style behavioural deterrent scheme. This would levy a tax on businesses who buy construction work in a way that doesn’t support industry innovation or skills development.

Clients could face paying a suggested levy equal to 0.5 percent of a scheme’s construction cost but would have the ability to avoid paying this tax completely by commissioning construction in a more responsible way.

“The construction industry doesn’t have the impetus needed for this change, it requires external action to initiate change,” said Farmer.

Commissioned by the Department for Communities and Local Government and Department for Business, Energy and Industrial Strategy, Farmer has made 10 recommendations which include:

  • Using the residential development sector as a pilot programme to drive forward the large scale use of pre-manufactured construction, for example, through off-site built or modular housing;
  • A wholesale reform of the current Construction Industry Training Board (CITB) and its related levy system, including a new mandate to properly fund and drive forward both appropriate skills development and innovation to suit a modern progressive industry;
  • Government to use its education, fiscal, housing and planning policy measures to initiate change and create the right conditions that will support the construction sector’s modernisation.

The report urges housebuilders to invest in methods which make work less labour intensive, such as offsite construction. This, in turn, could make a career in the sector more attractive for young people by moving the work from traditional building sites to modern factories.

Modular construction has been steadily gaining momentum in the UK. In February, Legal & General launched its modular housing business, Legal & General Homes “This construction method is safe, clean, and fast, providing a high level of consistency and durability,” said Paul Stanworth, Managing Director of Legal & General Capital, said. “We sincerely hope that Farmer’s review galvanises the entire sector to invest in innovation and secure its future.”

In August, Essential Living teamed up with Elements Europe, a modular specialist, to deliver one of the UK’s first modular Build to Rent schemes. “We’re exploring modular construction throughout our portfolio thanks to the key advantages it offers us as a rental developer and operator, whether that’s shorter programme time or design consistency,” said Ray Theakston, construction director at Essential Living.

Engineering company Laing O’Rourke is making the necessary investments to create real critical mass in the delivery of pre-assembly and modular solutions. “There is significant scope for radical transformation through the adoption of new technologies and advanced manufacturing approaches,” said Ray O’Rourke, chairman and chief executive at Laing O’Rourke.

“This will deliver the quality housing stock the UK urgently requires and directly address the acute skills gap that threatens our very future,” O’Rourke added. “Government, developers and deliverers need to invest collectively to achieve these shared goals and future-proof the industry.”

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