Brexit, technology and labour woes are all contributing to a year of uncertainty in 2018. But what are the main issues facing the sector and how can it ensure optimum profitability and productivity beyond 2018?
In this article, we discuss the greatest worries of the construction sector and how professionals can practically overcome these obstacles to ensure their businesses keep growing.
Main obstacle the construction industry must overcome in 2018
Multiple problems are facing those in construction. From profitability to sustainability; economic, social and political factors all play a part in the success of firms within this industry. Here is a selection of the major problems that the construction industry is fighting against in 2018:
Trouble with the EU divorce
Brexit inherently breeds uncertainty — and the construction industry is not immune. While there is speculation regarding how the construction sector will fare after 29 March 2019 — the official leaving date — negotiations are ongoing, and we don’t yet know how taxes, imports and labour between the UK and EU will pan out.
However, official statistics suggest that more than 5% of construction workers come from EU nations, with this figure increasing to approximately 50% in south-east England and London. John Slaughter, director of external affairs at the Home Builders Federation, said that to improve the housing sector, the UK will “need access to foreign workers under a manageable migration system” post Brexit. Stopping the easy migration of quality workers from EU nations will almost certainly have an adverse effect on the industry — as well as the government’s drive to build 300,000 homes a year.
And the issues don’t stop at labour. According to government data, around 62% of imported building materials come from the EU. Combine this with a potential negative change in VAT and tax, and a loss of access to the European Investment Bank and European Investment Fund — major investors in construction SMEs — and we could see higher product prices and less capital for the construction sector.
Being environmentally friendly
The World Economic Forum states that the construction sector makes up around two-fifths of the planet’s harmful carbon emissions. With a global drive to crackdown on carbon emissions, any sector that doesn’t assist with this initiative could run the risk of incurring sanctions and fines — another potential hit that could affect the construction industry’s profitability.
At what speed is the industry capitalising on innovative gadgets and technology? From robotics to BIM — building information modelling — there’s a wave of new technologies and gadgets available to help make construction more efficient and profitable. However, this is only possible if building firms of all sizes are willing to get on board with a new way of working.
Recently, the Federation of Master Builders — the UK construction industry’s largest trade association — announced that the shortage of workers had faced its worst level on record for small and mid-sized firms. Apparently, the issue is industrywide and affects almost all types of jobs.
This shortage is costing the industry money. Due to the lack of skilled tradespeople, wages are rising for jobs within the sector, which, along with a rise in material cost, is impacting on profitability for building companies.
Combatting these challenges
Trouble with the EU divorce
Brexit will be unclear for a while yet. However, it’s apparent that material costs and the ease of employing the labour of EU nationals are the sector’s greatest concerns.
Creating detailed inventories is a shrewd way to monitor and lower costs. Replacing can be more costly than simply repairing and vice versa, while not ‘shopping around’ for the best local prices can mean bargains are missed. Although we may not see a significant increase in charges and tax for EU imports, it may be worth sourcing UK- and none EU-based alternatives now to ease the pressure in 2019.
Regarding the EU workforce, the European Commission recently allowed a petition to go ahead that is demanding permanent EU citizenship following Brexit. If it goes ahead, this may assist the UK construction industry is keeping hold of its current EU employees. However, a deal is still pending to determine how easy it will be for workers from countries currently in the EU to move to the UK after March 2019.
Being environmentally friendly
The government is determined to lower carbon emissions by at least 80% of 1990 levels by 2050. Consequently, the construction industry must invest in lowering its carbon emissions to avoid potential penalties.
Utilising recyclable materials is a simple and effective route to take. Furthermore, many construction work platform vehicles come with eco-friendlier hybrid motors or can be powered by batteries, while utilising solar energy panels, non-toxic paint, locally-grown timber, and low-energy lightbulbs during the construction process will all contribute to a greener industry.
According to Burcin Kaplanoglu, leader of Industry Strategy and Innovation at Oracle, the construction industry made progress last year in its bid to incorporate new technology. However, can we see it in action across the UK?
Firstly, construction software that makes speaking to multiple construction teams on a project is rising in use. Similarly, BIM and augmented reality technologies help project managers spot potentially costly issues before the physical construction, and these are also becoming more popular. Similarly, robotic machines are helping ease the pressure of a lack of low-level workers while making potentially hazardous jobs easier to complete, and advances in materials — such as self-healing and permeable concrete solutions — are solving longstanding problems, like cracked building foundations.
In fact, harnessing new technology may even help construction companies labour shortages and environmentally-unfriendly methods!
The Chartered Institute of Building claims that the construction sector will need to secure 157,000 new recruits by 2021 if it wants to keep up with demand. Perhaps the industry should invest in apprentices to help? Positively, apprenticeship starts are at a record high in the UK construction industry. According to the Construction Industry Training Board, figures hit 26,195 by the end of 2017 — nearly 10,000 more than the number in 2012.
To survive, it may be essential for construction firms to encourage numbers of apprentices — whether this is via positive workplace initiatives, bonuses or a closer relationship with schools.
Evidently, issues exist in the sector. However, a bright future is not unattainable. By adopting eco-friendly processes, being responsive to new technology, having a plan in place for Brexit, and encouraging apprentices to come on board; the industry can thrive in 2018 and beyond.