Friday, 1 May 2015

Technology, partnerships and diversity is the future for the construction industry


Overall there has been a decline in global economic growth compared to a year ago, a PwC survey has found,  which isn’t surprising given the fall in oil prices, the instability in the European Union, fiscal deficits in a number of countries and also the current Ukraine situation. This is on a global basis but when construction CEOs were asked about their own business it was clear they saw growth with key drivers being good visibility of pipeline and order book and a clearing down of the backlog. A lot of businesses are also seeking to expand into emerging countries and take advantage of increased infrastructure spend.
 
So let’s have a think about what is driving economic growth – well it comes down to emerging economic growth, demographic changes and increasing urbanisation. All of these are underpinning growth with 41% of CEOs expecting to enter new sectors to seek better margins and reduce or spread the risk.
 
What is interesting to see is how the industry is making use of partnerships, technology and diversity to grow their business.
 
Technology
BIM is a key development which will have significant implications for the industry particularly construction costs and waste; but will also facilitate monitoring the whole life operating costs and performance of projects. This advancement although in early stages of actually being used will have far reaching changes to how businesses approach projects. The use of technology will also provide for increased data on construction projects and operating costs and undoubtedly present significant opportunities for the owners of that data. And let’s not forget the advancement of the 3D printer advancing the industry. This does still leave the challenges of cost, being more efficient and making use of these advancements and the overall skills required in the sector.
 
Partnerships
Moving away from your normal trade or geographical area can increase the risk to a business but what many are doing is spreading the risk by partnering – this is facilitating expanding into new markets, cutting costs and sharing the risk. The new markets are bringing new customers and the sharing is allowing for larger projects to be bid for. One area you see this more and more is bids for government contracts – showcasing a  number of partners tends to bring a mixture of skills.
 
Diversity
The industry is waking up and moving forward and it no longer feels solely like a “men’s club”. This promotion of diversity and inclusiveness is helping the industry in a time of skills shortages particularly engineers and other skilled trades. Its early days but I’m starting to notice more women in the industry and actually hearing about new ideas as a result.
 
So do I think in a years’ time all will be well, of course not as the above three items are long term investment. However the sheer recognition that these can support growth is all the industry needs to move in the right direction.
 
There is only one week until the Election Day so here are a few final thoughts on the topic:
 
Conservatives – Very strong promotion of a Northern Powerhouse and the recent budget took steps to make that clear. The idea of HS3 is okay, actually starting it will be the key – doing is better than saying. My concern is that private renters will lose out and poor performing housing associations will win under Right-to-Buy effectively reducing the housing stock for those who can’t afford even the reduced prices. Now the argument will be that the sales fund future developments, I guess I’m just a cynic that actions again speak louder than words – how many affordable homes are built a year again….Recently the Institute of Fiscal Studies warned that this scheme risks dividing communities into rich and poor, has uncertainties around actual revenues it can raise and doesn’t appear to be winning over the public. The Brownfield Regeneration Fund should though help specialised developers bring forward some fairly innovative schemes on previous poor land.
 
Labour – The party for the SME house builder, the saviour of the industry if only they could get finance, well fear not Uncle Ed is coming to your rescue however the mansion tax is silly, just silly. Yes they can afford it but we want to retain this people in the UK not have them move residency to other European cities. My key concern to Labour is “Use it or lose it” feels too iron fist at the moment but initiatives to help increase smaller sites available to SMEs makes me smile. The other issues is the lack of clarity around some key points – like how will you build 200,000 homes and how are you actually going to funnel Help-to-Buy ISAs into your Future Homes Fund – potentially crowd pleasers with no detail. Think we may be worse off.
 
Liberal Democrats – Sounds lovely doesn’t it – developments focussing on walking, cycling and public transport. Sounds very lovely if it wasn’t a pipe dream as for starters you need to sort out public transport! And the Mansion tax crops up again (call it what you want it’s just the same!). The stand out is 300,000 homes per year and a housing investment bank. I am however doubtful of being able to deliver without more details and the idea of garden cities, well as a Northern is unknown because it just feeds the south.
 
Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.
Enjoy the weekend
Lee
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