The Farmer Report: One Year On

Research: James Smith

In February 2016 the government asked the Construction Leadership Council (CLC) to look at the labour model in the construction industry and the skills pressures and associated constraints that limit housebuilding and infrastructure development.

In response the CLC asked Mark Farmer, of real estate and construction consultancy, Cast, to carry out a review. The result was the Farmer Review of the UK Construction Labour Model - Modernise or Die'.

Download the review (October 2016)

The wide-ranging and thought-provoking report suggested that the UK construction industry faced 'inexorable decline' unless a range of longstanding problems were tackled.

These problems included:

• Low productivity
• Low predictability
• Structural fragmentation
• Leadership fragmentation
• Low margins, adversarial pricing models and financial fragility
• A dysfunctional training, funding and delivery model
• Workforce size and demographics
• Lack of a collaboration and improvement culture
• Lack of research and development, and investment in innovation.
• A poor industry image

The report then presented a number of recommendations to help the industry modernise. In particular that:

• The Construction Leadership Council (CLC) should have key oversight and ability to co-ordinate and champion the changes set out in the report.
• The Construction Industry Training Board (CITB) should be reviewed and reformed.
• Working relationships should be improved and increased funding should be made available for research and development (particularly in areas of off-site manufacture and prefabrication).
• The industry (including client bodies, government, and academia) should drive innovation in line with market needs.
• Training (with support of the CITB) should be improved to deliver future young professionals who are digitally adept and ready for the current and future construction environments.
• A positive current and future vision of the digital construction industry should be developed.
• Government intervention should take place to provide further education, planning and tax or employment policies to increase and maintain the applicable skills capacity.
• A government stimulus should be applied in the housing sector to enhance pre-manufactured methods through changes in policy.
• A government 'pipeline of demand' in the housing construction sector, similar to the National Infrastructure Pipeline, should be introduced.

The government's response to the report was published in the Summer and provides an update on how the reviews's findings and recommendations have been incorporated into policy development.

So, a year on from the report's publication, what's happened so far, and what happens next? Here's a point-by-point guide...

• The Construction Leadership Council (CLC) should have key oversight and ability to co-ordinate and champion the changes set out in the report.

The government believes the CLC has a vital role to play in leading change in the industry and should have strategic oversight of the 'Modernise or Die' agenda.

The CLC should determine how best to achieve this though government agrees that working groups on skills, business models and innovation seem relevant and should draw on contributions from other interested groups.

The government backs closer working between the construction industry, clients and government (a 'tripartite covenant') made real through more consistent procurement and further development of BIM.

• The Construction Industry Training Board (CITB) should be reviewed and reformed.

A review of the CITB and the ECITB headed by former government Chief Construction Advisor Paul Morrell was undertaken in Autumn 2016 and the government agreed that the CITB should be retained.

A reform programme is underway to reduce the size of the CITB and to refocus the body on aspects of the skills agenda where there is clear market failure or where a collective approach to training can deliver real benefits to employers.

Government will publish the final report of the review shortly which will set out new arrangements to ensure the CITB remains accountable to industry.

The industry has voted to retain the CITB levy following the body's most recent triennial consensus.

• Working relationships should be improved and increased funding should be made available for research and development (particularly in areas of off-site manufacture and prefabrication).

Government supports this aim through long-term commitment to investment in infrastructure and housebuilding.

It is proposed that the housing sector should be used as a scalable pilot programme for more integrated commissioning. To this end, the CLC has been tasked with developing better models of client commissioning, with a focus on longer-term collaborative relationships and using technology to improve performance and productivity.

When it comes to housebuilding government has committed to a spend of £25bn and the Housing White Paper goes further in setting out a long-term strategy that should help industry invest in new capacity and innovative approaches to delivery. The Accelerated Construction programme should also encourage medium and low volume builders and new developers and result in building at double the rate of traditional housebuilders.

• The industry (including client bodies, government, and academia) should drive innovation in line with market needs.

Championed through the CLC's innovation workstream good progress is being made to recommend activity to meet future innovation needs. Government is also tasking the CITB to support the innovation agenda.

Government is working with the CLC to develop common metrics for an industry dashboard. Government will work closely with the CLC to understand priorities and remove barriers and develop a shared innovation programme. It will also seek to aggregate demand from key clients, champion innovative approaches and smarter construction methods, and continue to drive the adoption of BIM through procurement practices.

Government is also supporting a joint working group to ensure that access to finance and insurance do not stifle innovative modes of construction.

• Training (with support of the CITB) should be improved to deliver future young professionals who are digitally adept and ready for the current and future construction environments.

The government's Industry Training Board review (due this Autumn) will set out expectations and scope. The CITB is expected to make an important industry contribution to a modern construction industry and this includes its grant scheme. 

The wider industry is also expected to support the development of standards and invest in training opportunities for those looking to develop skills to work in the industry of the future.

• A positive current and future vision of the digital construction industry should be developed.

Apprenticeships and technical education routes (including construction) will create easier pathways to relevant professions. The CITB is already working with schools, as are other organisations. Industry is called upon to support this work, including the development of the Go Construct website to ensure the 'story' the industry tells is compelling and reflects the changes in the industry as it continues to modernise.

• Government intervention should take place to provide further education, planning and tax or employment policies to increase and maintain the applicable skills capacity.

The government has published a Green Paper on Industrial Strategy and will continue to work with the CLC, working groups and industry to address barriers to growth.

Any 'proposals for a sector deal' for construction will be carefully considered by government and the government will also ensure that the objectives of the Industrial Strategy are taken account of in the planning system. 

• A government stimulus should be applied in the housing sector to enhance pre-manufactured methods through changes in policy.

Government has invested £25bn with the aim of increasing supply across a range of tenures and types. The Housing White Paper sets out a range of measures to stimulate innovation and spur adoption of modern methods of construction. 

• A government 'pipeline of demand' in the housing construction sector, similar to the National Infrastructure Pipeline, should be introduced.

Local Authorities are now obligated to publish registers of land suitable for custom build and brownfield land suitable for development.

Government will seek to make more data available to aid planning and investment decisions. The government will also work with the CLC to improve understanding of aggregate demand across the industry.

Equity commitments have been made by government to support the Build to Rent sector to the tune of £1bn (and also through the £3.5bn PRS Guarantee Scheme). Under the PRS scheme £265m has already been loaned and a further bond (at time of response) was expected to be issued. 

• If a voluntary approach does not achieve step-change government should consider a charge on business clients of the construction industry to influence commissioning behaviour and to supplement skills and innovation funding.

The government does not currently support this kind of proposal as it has the potential damage developer confidence and increase costs, if only in the short term.

Download the full government response (July 2017)

A year on: What progress?

A year after the report and it's clear that there has been some movement but like a luxury liner, it takes time for any impacts to be fully felt.

With the complications of Brexit and its potential (and actual) impacts, not least the possible loss of skills and labour, there's a clear need to put words into action and quickly.

What is apparent, industry-wide, is a willingness to change and adapt and government and trade organisations have a key role to play in building on this momentum.