The art of the deal

As the hard graft of Brexit negotiation starts, the Government needs to switch its attention to preparing for its future outside of the EU. The launch of the modern industrial strategy in January is a key step in these preparations. Business secretary Greg Clark emphasises that the objective of the strategy is to improve living standards and economic growth by increasing productivity and sharing wealth across the whole country. Given construction’s poor record in improving productivity, our opportunity to participate in sector deals with government and clients needs to be grasped at the earliest opportunity. The Construction Leadership Council (CLC) is working towards this early engagement on construction’s behalf.

The Industrial Strategy has three key themes, and it is important to take all three into account when planning construction’s engagement. The first is that the strategy builds on existing strengths in areas such as aerospace and automotive. One way of looking at this is the challenge that a diverse industry like construction will never be able to compete on the same playing field for support with high-profile, investment-hungry sectors such as life sciences. Another perspective is that sectors such as aerospace have developed a replicable model of competitive collaboration that other industries can emulate – the CLC is working with the Government-backed High Value Manufacturing Catapult programme to do just that.

The second theme is that every place in the UK must be able to meet its potential. There are few industries better positioned than construction to support this objective – whether by improving connectivity, delivering homes or by driving spend and skills into local economies. The final theme is that the strategy is to make the UK one of the most competitive nations in the world. Here construction has a challenge. We know that productivity in the industry has flatlined for the past 20 years and that there are real barriers to increasing levels of investment within the sector. However, if we follow the lead of other industries by pooling capital and resources, construction will find itself in a stronger position to make progress against this goal.

Construction has its established 2025 performance targets to reduce cost, time and carbon. To help with this, the CLC has developed a focus on a small number of key areas where industry can make a big difference by working together in the same direction. The first of these focus areas is digital, building not only on the great foundation established by BIM Level 2, but also a lot of innovation in areas such as augmented reality which give clients greater confidence that they will secure the planned outcomes from their investments. The second theme is manufacture, crucial not only to improving productivity, quality and safety but also to addressing the skills challenges associated both with Brexit and workforce demographics. The final area is life-time performance – emphasising the opportunities of smart assets, and the need to make better use of the potential of sensors, data and real-time management to deliver buildings and other assets which perform as planned.

So, the CLC has a plan, but the proof is in implementation – what will be happening over the next few months? It is helpful that there are several building blocks for a deal already falling into place in 2017. The Farmer Review, for example, makes a strong recommendation with respect to cross-industry participation in investment and innovation, and the review of skills and the CITB by Paul Morrell is well advanced. Another consideration is that the sector deal process envisaged in the industrial strategy is likely to be a long-term relationship between government, clients and industry rather than a one-off opportunity. The plan is to start with focused, single-issue-based deals, enabling the CLC and the industry will build the skills and capability needed to address more challenging areas of the agenda such as direct investment in innovation and capacity building. Successful deals must be reciprocal exchanges between government and the industry, with the industry assuring a positive response to public-sector market interventions such as the Level 2 BIM mandate.

The outline of potential deals is now under development. In the short term, skills initiatives aligned to the apprenticeship agenda or public sector procurement work aligned to pre-qualification and best-value could form the basis of a first set of deals if they provide the basis for the reciprocal exchange. Similarly, existing industry innovation initiatives such as the I3P (Infrastructure Industry Innovation Platform) provide evidence that construction industry innovation is investable and delivering real returns. The real prize however will be deals that are aligned to one or more of our sector priorities: digital, manufacture and life-time performance. The CLC’s Innovation in Buildings work-stream for example is well-advanced, with a broad-base of industry support in place to bring all three elements together to deliver a potential step change in the application of manufacture to construction in the UK. What role government and other clients have in driving the step-change will be the nature of the deal and is yet to be determined – opportunities to shape demand to underwrite the industry’s investment in manufacture at scale will be very important.

The Government has demonstrated ambition in setting out its modern industrial strategy. The CLC plans to engage early and create opportunities to bring together key representatives of government, clients and industry to align around our proposed deals. The industry strategy is no silver bullet, but it does present construction with a welcome opportunity to create momentum around change.

In creating the potential for deals, the role of the CLC is to bring clients, government and the industry to focus on the opportunities that will have the greatest impact. Industry’s engagement with these deals will be crucial to our long-term success.

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