Off-site Manufacture for Construction (Science and Technology Committee Report)

Baroness Neville-Jones Excerpts

Wednesday 12th December 2018 Lords Chamber

[Baroness Neville-Jones (Con)]

My Lords, some clear themes have already emerged from the discussion of this report in the remarks of noble Lords who have spoken, so I can be brief. Before adding a few thoughts, I will say how good it is to have Members of the House with personal experience of the construction industry participating in this debate. I thank our chairman, the noble Lord, Lord Patel, for the way in which he guided our deliberations. We also had excellent support from our clerks.

In our discussions, members of the committee had the sense that we were tackling something very immediate in its nature and in the issues that it presented, but also something with very long-range consequences. We are pleased that the response of the Government, who have a key role to play, has been gratifyingly positive. But, as with so many things in life, it is the implementation of the proposed strategy—in this case for a construction centre—that counts. Perhaps the Minister, in his reply, will tell us just how far things have got to date. We need to know that a beginning has been made on the sector deal.

One of the striking things about the construction industry, as other noble Lords have remarked, is that it is very big. It represents 8% of GDP and 10% of employment, and these are big figures. It is twice the size of the car industry, but its image, of course, is very different. I think noble Lords have commented on image, which is on the whole rather negative. Sometimes you can get an undeserved image, but I fear that in this case it has to be regarded as related at least to a large part of reality. The construction industry does have a reputation for late delivery, variable quality and low margins. That, on the other hand, hides some of its outstanding attributes. The quality of British architecture and engineering, and the much more positive record in the construction of large projects and high-rise buildings, tends to get obscured by this more general negative reputation.

Low-rise construction, on the other hand, and general building, is a different story. It is badly capitalised and characterised by lack of leadership, the workforce is in decline—as other noble Lords have mentioned—and there are more leaving the industry than entering it. That problem is undoubtedly already, I fear, being deepened by Brexit. It is an industry with an inadequate skills base, insufficient opportunities for training, a fragmented structure, slow and unreliable supply chains and a cyclical work pattern. All these things add up to that conclusion. In short, it is old-fashioned and underperforming. As other noble Lords remarked, it lacks appeal for young people to make a career in it. That is something we need, obviously, to change.

In such a situation, it is not surprising that the construction industry is not in a position to respond to the challenges of the housing crisis. This is not the place to discuss the housing crisis, which is a very big topic and which has built up over many decades and has several roots, including planning delays and other factors that certainly go well beyond the scope of the construction industry to deal with and remedy by itself. This has to be a national effort, involving the Government in a central role. The lagging rate of build that we are experiencing, which aggravates that crisis, is part of a fundamental problem. We are not going to achieve, or the Government are not going to achieve, the aim of 300,000 houses a year in the absence of major improvement. Without change in the profitability of the industry, its outlook will remain very mediocre. This dim outlook for both industry and customer need not be the case. We have the opportunity to make a major change, and that was what the committee focused on.

We paid an interesting visit to Laing O’Rourke’s manufacturing site. It gave us an idea of the industrial changes that could transform the industry and its prospects, including energy-efficient modules produced off site which could be assembled on site in different formations. The point has been made, and I think it is an important one, that off-site manufacture does not mean boring buildings. It can actually mean rather more attractive buildings, because the modules can be assembled in different ways and you can produce something that is less uniform than a lot of the construction that is done on site. It also provides the potential for significantly higher quality and build for the same price, more reliable delivery, less risk to the health and safety of the workforce, and much higher productivity overall. So it is a very good prospect.

However, the outcome can be achieved, as other noble Lords have remarked, only by a changed relationship between the client and the builder—in other words, a different business model. To operate fast on site, detailed planning has to take place at a much earlier stage of the contract. Much of the expenditure which would take place in the traditional model only at later stages, when you come to the fix, have to occur much earlier. Thus, significant flows of cash also need to take place at an earlier stage, with obvious implications for both client finance as well as the builders. That applies whether it is public or private sector activity. Certainly we need to move to a way in which, when we look at the whole question of costs, we are looking at value and whole-life costs as an important part of the cost implications.

The challenge lies in how we get from where we are now to where we need to be to achieve the goals that the Government have in mind. They want to see a 30% increase in the speed of construction, a 25% reduction in costs and an increase in energy efficiency. I am sure that we all endorse those goals, but they are very ambitious and imply a revolution in construction. It is a question not only of how we build but of important ancillary issues such as the provision of adequate finance to underpin the structural changes and a much more highly trained and productive workforce. That in turn implies the provision of training and apprenticeships, which is currently lacking. The point has been made by other noble Lords and it is of fundamental importance. We also need to see greater innovation both in the construction process and in design. Standardisation has also been mentioned as an important factor. Those are the kinds of things that bring talent into the industry, encourage women to participate, and change the face and the perceptions of the construction industry over time.

Much hangs on the ability of the joint government/industry Construction Leadership Council network to work successfully towards the reforms that we want to see, including the ancillary things that I have mentioned, as well as the availability of capital and mortgage finance, and the releasing of land from stifling planning procedures. This is a very broad canvas that one has to operate on to get the results that we would all like to see. Therefore, I hope that when my noble friend the Minister replies, he will say something about these contextual factors, which have the potential to enable the industry to move forward and whose absence will constitute blockages.

As has been said by other noble Lords, a number of central government departments that have significant building programmes have committed themselves to a presumption in favour of modern construction methods. It would be helpful if the Minister could tell us what this commitment is intended to mean in practice—how much weight “presumption” will bear, what tangible changes we can expect as a result of it and how its attainment will be monitored. Another noble Lord mentioned monitoring. That is how we can really assess whether anything is happening, and it would be very helpful if the Minister would commit to reporting to Parliament on progress.

If government departments act on the leverage that they have at their disposal, not only will that be in the immediate public interest but it will also, frankly, be in the long-term interests of the industry. When I talk about government, it is not just central government that has to be involved; local government is a big sponsor and purchaser of construction generally, and in particular of housing, and they have to be on the same wavelength. This needs to be an all-government effort.

Bringing the construction industry into the 21st century, if I can put it in that way, is a big, although not impossible, joint task. It requires us to get down to the last. It also requires—this is the sense of our recommendations and has been endorsed by what has been said in the House already—a partnership of trust and determination between government and industry across a wide range of issues, and, as other noble Lords have also said, that partnership needs to be able to survive changes of administration and personalities.

--- Later in debate ---

[Baroness Neville-Jones]

In the example that my noble friend has just given, in any competition where there is more than one potential supplier and one of them offers a much higher degree of commitment to off-site manufacturing, will the Government choose that contract even if it is more expensive—not outrageously more expensive, but potentially more expensive than something more traditional?

[Lord Henley]

I am not going to give any guarantee, if that example was in a competition, but I will certainly pass it on to colleagues as a matter to consider in such an eventuality. I was trying to stress what the presumption was, what it meant and how we will make use of it.

I also give an assurance to the noble Lord, Lord Fox, that we will continue to work with local authorities and housing associations to ensure that they take these matters on board. I hope that he will be content with the words I use about “working with” and consider that that is the right way to go about it.

I thank all noble Lords who have taken part in this debate. If I may make a pun, it has been genuinely constructive. I think I am the first one to make that pun, which rather surprises me given the 12 speakers, but there it was. It has been constructive, but I hope that the Government have also given sufficient assurances that we wish to be constructive in this. We believe that our commitment to the technologies in this field is one that we can be proud of.