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Farmer Review puts strong case for change in construction sector

Words: Laura Edgar
Houses under construction

A ‘carrier bag charge’ scheme that would levy a tax on businesses that buy construction work in a way that is unsupportive of the industry has been recommended in a government-commissioned review.

The Farmer Review Of The UK Construction Labour Model (pdf) suggests that Britain’s construction industry faces a “long-term and inexorable decline” if how it operates and delivers is not addressed.

The review discusses the industry’s “dysfunctional” training model, its “lack of collaboration” and its “non-existent research and development culture”.

It also states that one of the critical features of the industry is its “extremely poor level of productivity” while recent levels of construction cost inflation experienced in some parts of the industry has “undermined project viability” – especially in the residential sector.

The review proposes better alignment of the needs of construction firms and the businesses that hire them.

Mark Farmer, report author and chief executive at Cast, 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, so that the investors, developers or building owners hiring construction firms increasingly dictate the use of modern methods of delivery and invest appropriately in the skills agenda to grow this part of the industry."

He said there are more similarities between manufacturing and construction than many people are led to believe and this perception "needs to change, starting in the housing market”.

The review, commissioned in February 2016 by the Department for Communities and Local Government and the Department for Business, Energy and Industrial Strategy, sets out 10 recommendations.

It states that the Construction Industry Training Board (CITB) should be comprehensively reviewed and a reform programme instituted. It should include a new mandate to properly fund and drive forward both appropriate skills development and innovate to suit a modern progressive industry.

In response, Stephen Radley, director of policy at 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, innovative and sustainable construction industry and we look forward to helping them to do this.”

The review also proposes a “carrier bag charge” style behavioural deterrent scheme. This would levy a tax on businesses that buy construction work in a way that doesn’t support industry innovation or skills development. Under this, clients could face paying a suggested levy equal to 0.5 per cent of a scheme’s construction cost but would have to ability to avoid paying that tax by commissioning construction in a more “responsible” way.

A further recommendation suggests 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.

Farmer said the industry needs to be “far more joined up” with its clients in how it approaches research, development and skills. He also wants ministers to directly intervene in certain areas to ensure that many of the issues identified are rectified.

Additionally, as more people are leaving the industry than joining it, the workforce is shrinking – placing constraints on its capacity to deliver housing and infrastructure. The review warns that substituting the domestic workforce with migrant labour comes with “substantial risks” and now it is uncertain how the UK’s vote to leave the European Union might affect the availability of migrant labour.

The review proposes exploring ways to make the work less labour intensive, such as through offsite construction.

Industry minister Jesse Norman said that given the launch of the £3 billion Home Building Fund, Farmer’s 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 Farmer Review of the UK Construction Labour Model can be found here (pdf).

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