Industrial Strategy

Lord Stunell Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Stunell (LD)]

My Lords, it is a pleasure to take part in this debate. I also welcome the production of the industrial strategy. I am pleased to follow the noble Earl, Lord Lindsay, with his strong emphasis on the need for quality infrastructure—a point to which I shall return in just a moment or two. I shall also draw in from one of the other threads of the debate what my noble friend Lady Randerson said, when she identified the 4 million shortfall in skilled workers that the UK economy faces in the near future. I also pick up what the noble Lord, Lord Maude, said, when he said to remember to talk to the small companies. I shall just weave in that social enterprises will not, I hope, be left out of that consideration as well.

Some of the strands of this debate have looked at whether the strategy is just repackaging or whether it is chasing the moon—but I shall take it at its face value as being a new and very important contribution to setting the UK economy in the right direction. The foundations set out are broad but sensible ideas, with much more to come on research, innovation and people, to develop a world-class skills training to match higher education. That is a very big objective to achieve, as many speakers have pointed out. There is to be an enhanced business environment so that companies can start, grow and prosper, as well as investment in infrastructure, particularly in transport, housing and the digital environment—and, in places, levelling up growth and providing job opportunities in every part of the kingdom. Those are very big and broad objectives.

The report talks of the grand challenges of artificial intelligence and big data, green growth and mobility, and of an ageing society. I suggest to your Lordships that as well as those four big challenges there is one missing challenge necessary to be met before the five foundations can be delivered, the challenge of a shrinking labour force and a reducing capacity to deliver in the one industry that is central to the delivery of all of that—the construction industry. That is not just a nice-to-have industry, but a vital one. If you want the ideas foundation, you will need laboratories and workshops, and they will need to be built. If you want world-class skills training to match higher education you will need buildings to conduct it in, and you will need laboratories, workshops and, possibly, a revamping of many of our colleges of further education. If you want a business environment where companies can readily start, grow and prosper, you will need the construction industry to deliver.

I could go on—but let us just take housing. If you are going to double housing production, in very broad terms you need to double the construction force building those homes. I am sure that the Minister will talk about modern methods of construction, but not I think a 50% improvement in productivity in the next two years. If you want to level up growth across the country, whether it is with the northern powerhouse or any other of the regional development strategies, that also requires the construction industry. I labour that point because I welcome the planned construction sector deal as far as it goes, but I put to the Minister that it lacks urgency and a means of delivery, and it underestimates the size of the task.

Page 24 of the strategy states:

“There will, inevitably, be uncertainty while we determine the precise nature of our future trading arrangement with the EU. To minimise this, we are seeking to agree an implementation period, of around two years, to allow business time to adapt to the new arrangements”.


The bit of that that I take issue with is the suggestion that there is any uncertainty. Actually, there is a considerable degree of certainty about what will happen in relation to the construction industry. We know, for instance, that 8% of its workforce is currently from the EU 27 and, in London, 50% of the workforce in construction is from the EU 27. The ICE, supported by KPMG, produced a report submitted to the Exiting the European Union Committee in the Commons, which showed that, if the kind of infrastructure investment which I have just outlined and which is outlined in the Government’s strategy is going to be delivered, the construction industry needs an increase in capacity of 35%, whereas, if Brexit goes ahead and the Government are successful in reducing inward migration, as they clearly intend they should be, the capacity of the industry may shrink by 8% and by much more in London.

It is instructive to read the Government’s own impact assessment, so-called. Obviously, I cannot reveal in this place what I read when I went there; I am sure that the Minister will have read it and will be familiar with it. It is a very good primer on what the construction industry does, how it is organised and how the legislative framework runs round it. That is section 1—section 2 outlines the sector’s fears over what will happen with Brexit, and what will happen with labour. Then section 3, where the analysis, proposals and alternatives come, is absolutely and completely blank. I apologise for revealing that to the House when I swore that I would not do so. But I make it clear that the Government’s own assessment of the industry makes it clear that these are real problems. In case that is not sufficient, there is the construction industry’s own Brexit manifestos and the Construction Industry Training Board White Paper—and, of course, just before Christmas, the Home Builders Federation produced a report along the same lines.

I think that the Minister will say, “Yes, we’ve listened to all that, and we’re working with the Construction Leadership Council to make construction one of the first sector deals of this industrial strategy”. That is okay, as far as it goes, but the industry is now, this year—or last year, anyway—losing 70,000 people from its labour force by retirements, and is recruiting from UK residents fewer than 40,000 people per year. It is topping that up by inward migration, predominantly, at 90%, from the EU 27. People might think, as a caricature, that it is bricklayers and plumbers—but the RIBA says that 25% of the registered architects practising in London are from the EU 27 countries. So this is a problem that will affect the construction industry and the Government’s capacity to deliver their whole industrial strategy from top to bottom.

The Government have a problem, because they want to do two things. They want to stop inward migration. Perhaps the Minister does not want to—and there may be some caveats about that—but it is a fundamental driver to reduce inward migration. At the same time, the strategy will increase the need for the construction industry to deliver by 35%. Slowing down the flow in and expanding the delivery, all in time for the next general election, sounds like a pretty tall order to me. The measures here, and the construction deal in its embryonic form, are no match for the task of supporting an expanded and strengthened construction industry that could deliver on the industrial strategy’s five foundations or meet the four grand challenges.

What is needed first is world-class skills training. Let us suppose that this can be begun in September this year. It surely cannot start earlier than the new autumn term. That means that the first apprentice from this will be available on site and in the design offices in June 2022. The first engineers and architects will be available in June 2023 and 2024. Assuming that everything goes to plan and people can be recruited, people with the high level of skills needed will not be available until 2022, 2023 and 2024. This means that the absolute priority for the construction industry has got to be retaining the existing EU 27 workers who are currently in the workforce and making sure that there is a long-term, simple and cheap transition period for the industry to fill the gap in the meantime. The possibilities of expanding the workforce both by volume and by period of time are vital issues to be addressed.

Having, I hope, convinced the Minister of the need for that long transition deal and easy access to EU 27 labour, the second need is for a strong and stable pipeline of public investment. Picking up on what the noble Lord, Lord Maude, said, 90,000 small companies are delivering almost half the output of the construction industry. Some 86% of those are very small companies with fewer than two employees. They have low incentives to engage in training. They have an unworkable apprenticeship levy to handle. If you are a bigger company, there is no incentive to spend on research, innovation or modern methods of construction or to build productivity unless there is a long-term commitment of public investment in the construction industry.

Thirdly, we clearly have to double skills training. That means retaining trainees in the existing training programmes. Eight out of 10 building trade apprenticeships which start do not result in people going into the construction industry; only two out of 10 of them do. This is, of course, because other offers come along and the construction industry is not seen as very high status. We have to appeal to the whole workforce, only 9% of whom are women. As my noble friend Lord Addington very ably demonstrated, a significant slice of people are excluded from ready entry to such apprenticeships because they do not have the statements to which he referred or the capacity to participate in the standard tests which apply at the moment. Interestingly, one of the largest building contractors that I have been speaking to said that his recruits last year were gamers. They are now looking for people who understand three dimensions and artificial environments when they are designing.

Finally, it is good that the Government have got an industrial strategy and that construction features in it. However, the Minister needs to recognise that construction cannot deliver what the strategy sets out without a huge step change. It cannot deliver 1 million homes and the infrastructure for that export-led boom will remain unbuilt unless the Government pick up the challenges to the construction industry which should have been in this report.