An article in Construction Management caught our eye this week which gave a rather damning summarisation of the state of the construction industry today and the political roots of the current situation. Stuart Green, author and Professor of Construction Management, was speaking to the 21CC podcast about the reasons for and results of the hollowing out of the UK’s biggest construction companies, who nowadays win the big contracts but subcontract out nearly all the actual construction work.

The golden days of robust government support

Without going into the politics behind this too deeply, many millennials working in the industry today may, like myself, have had no idea that prior to Thatcher’s reforms in 1982 the government had a longstanding practice of alleviating fluctuations in demand for construction by commissioning public housing and other works to fill in the gaps, in order to control unemployment and maintain a baseline of skills and capacity in the sector. This sounds like intelligent way to preserve the capacity of industry and with the bi-product being housing, in 2023 it would seem like a great idea. In fact at McCarrick Construction we adopt a very similar policy in microcosm, keeping residential projects in reserve to fall back on and keep our team employed during recession.

Transfer of risk, aka. passing the buck

However, for political and cost reasons this was summarily discontinued, and so the risk of employing armies of construction workers during our economy’s inevitable recessions fell upon the construction companies themselves. The biggest organisations quickly adopted strategies which would provide so-called “structural flexibility”, translated by Green as “the ability to expand and contract painlessly in accordance with fluctuations in demand”. The question is: painless for whom? Because in practice, this translated to shedding overheads, employing subcontractors rather than training and nurturing teams of directly employed, permanent staff, and “[removing] themselves from taking responsibility for the physical task of construction” as Mr. Green says.

Long-term ripple effects further down the chain

This has had many negative effects – on clients, on the end users of new buildings, on young people coming into the industry, but especially on the long-suffering subcontractors.

To start with, the risk of poor productivity either in quality or timeliness of work has been passed down the supply chain – problems with build are immediately blamed on the subcontractor, resulting in lengthy disputes or smaller firms going bust trying to rectify problems that have been made more complex by the complicated contractual setup or their lack of knowledge of contractual law. These tradespeople are also burdened with the cost and risks associated with training up the next generation – apprenticeships and providing further courses to upskill staff also falls to their employers, the SME’s and small specialist firms to pay for. Of course, 90/120-day payment terms have piled further pressures on these put-upon companies in terms of cashflow and financial security.

Stress and instability for workers at the coal face

In the broader societal picture, this policy has led to a huge growth of workforce casualisation whereby 50% of construction employees are now listed as self-employed, a situation which is all but encouraged by the set-up of our tax system. For some the flexibility provided by freelance work works well, but for others this can be a cause of stress as they are left to administer their own finances, and loss of work/life balance as holidays aren’t paid and overtime becomes part of everyday life. It can lead to a lack of cohesion and team support among workforces, resulting in lack of a sense of pride in, or accountability for, the quality of workmanship and a culture of blaming and passing the buck when mistakes are made. It also, most importantly, leaves workers vulnerable to unreliable workflow which affects their income and/or stable home life. All this must logically be at least part of the story behind the dramatic decline in mental health across the construction employment landscape in recent years.

Why is it so difficult to get this fixed?

We are members of CAN (Construction Alliance North East), an organisation which lobbies government in support of these same regional SMEs with the aim of changing policy to make it fairer for those down the supply chain. After all, why should the big companies, cream off the profits while operating essentially as marketing departments? But with government seemingly always looking for a quick fix, achieving real transformation is frustratingly slow. Unfortunately, with every potentially world-changing political idea of the past few years has come more admin for Joe SME – see frameworks, competitive tendering, social value… These initiatives, initially intended to make things fairer, actually in practice widen the gap between those with big shiny offices and those making a living while operating out of tradesmen’s yards.

Procurement-based solutions

Stuart can’t understand why people don’t use standard forms of contract – he says there’s a complete lack of clarity in terms of what they are and aren’t responsible for with the current situation when heavily amended contracts are widely used. He says the government has just walked away from the idea of a project bank account.

Some great advice and a couple of potential political shifts do crop up in the comments section, if only anyone with any power to take action were reading them; “It’s about time clients when they ask for employment and training records also asked what % of the work did the contractor sub-contract. If it’s over 50% then they shouldn’t be on the list.” And/or “government intervention on employment rules (% of direct employees to turnover)” Sounds delightfully simple. But a word of caution: “It would be a bad idea for the big companies to take over and everyone become an employee, we need SMEs and sole traders.” Clearly this needs further discussion.

Whilst we have tightly cropped some of the highlights here, the interview goes into much more depth and it’s well worth a listen. It’s a sobering reminder of the bigger set of challenges the construction industry in the UK faces today, and the monumental effort and leadership, from industry and government, that would be required to change the course of the industry’s direction of travel. As Stuart says, “despite all the nonsense they have to deal with, [construction sector workers] get things built, and they get things built in fabulous ways. […] They are deserving of much better leadership than they get.”

Listen to the interview here (intro from approximately 19 minutes in)

Thank you Construction Management Magazine for bringing this to our attention here