Report calls for CITB overhaul and more offsite to halt ‘inexorable decline’

Surging costs, driven by a shortage of skilled workers, have stalled numerous housing schemes that have become too expensive to build, such as Galliard Homes’ Capital Homes project in east London.

“The prognosis for the industry, if action is not taken quickly, is that it will become seriously debilitated,” Farmer warns.

He highlights the “ticking timebomb” posed by a shrinking workforce, which could decline by 20-25% within a decade. More people are leaving than joining the industry each year and Brexit is likely to exacerbate the situation by restricting the inflow of foreign workers.

Mark Farmer

The report calls for an overhaul of training by reforming the Construction Industry Training Board’s grant funding model, along with a joined-up construction strategy pursued by the government, construction industry and clients.

Farmer puts forward an action plan to modernise the industry and boost housebuilding, including a “carrier bag charge-style” penalty which envisages levying a tax of 0.5% of a scheme’s construction cost on businesses that commission work that does not support industry innovation and skills development.

Construction minister, Jesse Norman, said: “This government is determined to support more house building, more quickly and in the places people want to live. Given the launch of the £3bn Home Building Fund, Mark Farmer’s important review in this vital sector is very timely. It makes a strong case for change in the industry, identifies areas where it needs to improve, and sets out areas for action. We will now carefully consider his recommendations.”

The review also calls on the government to increase the construction of social and affordable homes by registered providers. It argues that much of this housing can be built more quickly and cheaply using pre-manufactured modules rather than traditional bricks and mortar.

One example is Legal & General’s new factory in Sherburn, Yorkshire, the largest modular housing factory in the world, which will produce homes through automated processes used to make cars and other consumer goods.

Another is the drugmaker GlaxoSmithKline’s “factory in a box”, which contains multi-coloured components packed in reverse order for quick assembly. It has been developed for emerging markets and cuts the construction time from 12 weeks to four.

Farmer said: “If you buy a new car, you expect it to have been built in a factory to exacting standards, to be delivered on time, to an agreed price and to a predetermined quality. This needs to happen more in construction.”

Offsite construction is one way of dealing with the housing crisis says the report (Cartwright Pickard)

Farmer says the recommendations need to be taken up in full and put into action by the Construction Leadership Council.

Andrew Wolstenholme OBE, co-chair of Construction Leadership Council said: “The recommendations are well framed in recognising other work currently taking place. In July the government announced it will review the Construction Industry Training Board (CITB). That is a key organisation for this agenda, and the Council would like the review to be radical – to be the force for the changed industry that we need requires a changed organisation, with a remit centred on developing the skills of the future, and efficient and effective delivery and use of its resources.”

Responding to the Farmer review Stephen Radley, director of policy at the CITB, said: “The Farmer review sets out a compelling vision of how our industry needs to change and what CITB can do to support it. We are already reforming CITB to give it a laser-like focus on careers, qualifications and standards and training and development, backed by a revamped grants scheme. Employers have the opportunity to create a more profitable, innovation and sustainable construction industry and we look forward to helping them to do this.”

Ray O’Rourke, chairman and chief executive at Laing O’Rourke, said: “Laing O’Rourke has invested heavily in innovation and continuous improvement, and therefore I welcome many of the findings and recommendations of the Farmer review. The report shines a light on the serious and systemic issues in UK house building and the wider construction industry, and we cannot afford to ignore them any longer.

“There is significant scope for radical transformation through the adoption of new technologies and advanced manufacturing approaches. This will deliver the quality housing stock the UK urgently requires and directly address the acute skills gap that threatens our very future. Government, developers and deliverers need to invest collectively to achieve these shared goals and future-proof the industry.”

Mace chief executive Mark Reynolds said: “Farmer’s review makes it clear that the construction industry needs to invest in training and R&D to boost productivity and ensure we have adequate capacity to deliver the UK’s economic and social infrastructure. It underlines the importance of introducing new skills and technology to the sector. We all need to embrace this catalyst for change to attract a new breed of talent to revolutionise our industry.”

The 10 recommendations in full

Recommendation 1
The Construction Leadership Council (CLC) should have strategic oversight of the implementation of these recommendations and evolve itself appropriately to coordinate and drive the process of delivering the required industry change programme set out in this review.

Recommendation 2
The Construction Industry Training Board (CITB) should be comprehensively reviewed and a reform programme instituted.

Recommendation 3
Industry, clients and government should work together leveraging CLC’s Business Models workstream activity, to improve relationships and increase levels of investment in R&D and innovation in construction by changing commissioning trends from traditional to pre-manufactured approaches. The housing sector (spanning all tenures) should be used as a scalable pilot programme for this more integrated approach.

Recommendation 4
Industry, government and clients, supported by academic expertise and leveraging CLC’s current Innovation workstream activity, should organise to deliver a comprehensive innovation programme. This should be fully aligned to market, benefits case led and generate a new shape of demand across industry (with a priority on residential construction). It should quickly define key measures of progress and report regularly against these as a check on the possible need for more radical measures. It should, in turn, also help to shape CITB reform proposals in relation to technology and innovation grant funding initiatives.

Recommendation 5
A reformed CITB should look to reorganise its grant funding model for skills and training aligned to what a future modernised industry will need. Industry bodies and professional institutions should also take a more active role in ensuring that training courses are producing talent which is appropriate for a digitally enabled world, making sure that the right business models are evolved with appropriate contractual frameworks.

Recommendation 6
A reformed CITB or standalone body should be challenged and empowered to deliver a more powerful public facing story and image for the holistic “built environment” process, of which construction forms part. This responsibility should include an outreach programme to schools and should draw on existing industry exemplars and the vision for the industry’s future state rather than just ‘business as usual’.

Recommendation 7
Government has recently reaffirmed its commitment to having a strong industrial strategy. The government should recognise the value of the construction sector and be willing to intervene by way of appropriate further education, planning and tax / employment policies to help establish and maintain appropriate skills capacity.

Recommendation 8
Government should act to provide an“ initiation” stimulus to innovation in the housing sector by promoting the use of pre-manufactured solutions through policy measures. This should be prioritised either through the conditional incentivisation of institutional development and investment in the private rented sector; the promotion of more pre-manufactured social housebuilding through Registered Providers; direct commissioning of pre-manufactured housing; or a combination of any of the above. It should also consider planning breaks for pre-manufactured approaches.

Recommendation 9
Government, as part of its housing policy planning, should work with industry to assemble and publish a comprehensive pipeline of demand in the new-build housing sector. This should be along the same lines as the National Infrastructure Pipeline, seeking to bring private developers and investors into this as far as possible to assist with longer term innovation and skills investment planning.

Recommendation 10
In the medium to longer-term, and in particular if a voluntary approach does not achieve the step-change necessary, government should consider introducing a charge on business clients of the construction industry to further influence commissioning behaviour and to supplement funding for skills and innovation at a level commensurate with the size of the industry.

If such a charge is introduced, it should be set at no more than 0.5% of construction value, with a clear implementation timetable. Clients should be able to avoid paying this by demonstrating how they are contributing to industry capacity building and modernisation by directly or indirectly supporting skills development, pre-manufacturing facilities, or other forms of innovation and R&D.