Laura Capper, our Head of Sectors, talks to Simon Rawlinson, Head of Strategic Research and Insight at Arcadis UK and a member of the Construction Leadership Council, about the challenges and opportunities for construction in the short and long term.

“Everybody’s got to be thinking about the availability of materials and how they can manage their supply chains, closely followed by the capacity of the UK labour market and how they can make the industry more attractive to talent.

“We need to think about how we increase productivity, so we get more out of the resources and the labour we’ve got. There are lots of clients wanting the same thing at the same time, which in the short term is a challenge to manage.

Challenges:

• availability of materials and management of supply chains
• capacity of the UK labour market
• the war in Ukraine
• managing the recovery from the Covid-19 pandemic

Opportunities:

• decarbonisation
• infrastructure and the energy transition
• the demand for new housing
• data and assurance

“And then, reflecting on five years since the Grenfell Tower disaster, the quality and safety of the work we do is paramount. We need to give our clients and their customers assurance.”

“Businesses are having to address challenges in real time. The industry is in a responsive mode.

“If we look at the Ukraine disruptions, for example, they only started to hit us around three months ago when contractors were suddenly faced with their suppliers not being able to offer them price certainty on certain products.

“Businesses are starting to have productive conversations with clients about how they can manage that risk more effectively.

“Scarcity was a huge problem last year around managing the bounce back from Covid-19. Contractors have got much better at managing ordering with a long lead-in for materials, for example, making sure their logistics are working effectively. 

“Many contractors are more resilient and better at dealing with problems than they might have been two years ago.

“The labour force is a challenge. In three years, around 200,000 people have left the industry, so we’re down to around 2.3m now. We’re having to deliver with fewer people.

“We must encourage people to think about how they use labour more productively, including learning lessons from the procedures put in place during the pandemic.

“Contractors and clients are also thinking about how they can use fewer resources and materials and reduced labour to get the same outcome, because costs aren't going down.”

“The construction sector works on a project-by-project basis, which makes collaboration a bit harder on one-off engagements. When the economic environment is challenging like this, where businesses are asked to shoulder risks and financial exposure, collaboration in the industry can be on a bit of a knife edge.

“However, there does need to be greater cooperation around materials and making sure the second- and third-tier supply chain is in place. We’re seeing some signs of that with, in some cases, clients choosing to take some of the inflation risk as well, based on not paying up front quite as much as they would have done.

“There is also some good collaboration around innovation in the industry. The Construction Leadership Council established the Transforming Construction Challenge, an Innovate UK programme that’s funnelled the best part of £170m into collaborative projects, sharing knowledge and expertise to develop new technologies and solutions.

“We also have the government’s Construction Playbook , which captures commercial best practices and specific sector reforms, outlining expectations of how contracting authorities and suppliers, including the supply chain, should engage with each other.”

“Decarbonisation is a massive opportunity that sits in front of almost everybody in industry. It needs the development of new supply chains, and new capabilities around new builds or retrofitting, plus better capability of demonstrating that the work you’ve done will reduce carbon. 

“The ability to measure, for example, your embodied carbon, or trace things back in your supply chain, is going to become incredibly important. The organisations that set that up will have a very big competitive advantage.

“When it comes to infrastructure and the energy transition, for the biggest global contractors there will be offshore wind farms and transmission lines that need to be put in. For smaller businesses, there’s going to be local battery storage, installing charging points for EVs [electric vehicles] and so on. 

“The great thing about infrastructure is that, in a difficult, inflationary market like this one, infrastructure is seen as an inflation hedge – it attracts investment. 

“Meanwhile, we haven’t got enough housing. We know the need is 300,000, and we’re only doing around 210,000.

“Finally, we need to think about digital in everything we do. Digitising processes on-site, digitising quality control: that's going to become more and more extensive. That and demonstrating assurance that you’ve done things properly.”

Look out for more content coming soon on the opportunities and challenges in the construction sector, including sustainability, supply chains, and regional economic investment.