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Missing piece of the productivity puzzle: MP survey reveals policy 'blind spot'

Chartered Institute of Building

5 min read Partner content

An extensive report published today by the Chartered Institute of Building (CIOB) attempts to understand why productivity in the construction sector has stalled, and how this affects productivity in the wider economy.

Productivity growth is important; without it workers work longer hours to compensate, and businesses are less willing to invest. Whereas an economy with higher productivity growth can pay higher wages and reduce consumer prices.

It’s no surprise then that the Government is so keen to improve it, yet despite considerable efforts, productivity growth actually fell last year, to its lowest point since the financial crisis.

As in other economies, productivity is weakest in the construction sector - in the UK it has grown only 7% in the last 20 years. As the performance of the wider economy is inexorably bound to the efficiency of the built environment, this drags down productivity overall.

A report published today by the Chartered Institute of Building (CIOB) seeks to understand why construction sector productivity is so weak, what can be done to improve it, but also how the built environment supports productivity growth in the UK as a whole.

“This report throws up as many questions as it answers,” said CIOB incoming president Paul Nash. “But our focus is clear. The CIOB wants to kickstart the debate into productivity not just in terms of the industry itself, but how construction benefits productivity in the UK as a whole.”

The report includes a survey of 150 MPs weighted by party, and 481 industry professionals, who were asked what they thought were the most important factors in boosting construction productivity.

Differences in priority might suggest a lack of communication or understanding between policy-makers and industry. Equally, policy areas given little importance by either group may reveal a blind spot in previous attempts to solve the ‘productivity puzzle,’ which could then be flagged as a potential solution, warranting further research.

There was strong consensus between the industry and MPs on broad policy areas that would improve productivity, both placing people, the economy and innovation in the top three.

Both industry and MPs, thought that committing to boost investment in a recession (especially amongst industry and Labour MPs) was important, and that the establishment of a National Infrastructure Commission would improve productivity.

There was a large difference in attitudes towards investment with significantly more support from MPs than industry.

MPs gave far less emphasis to organisation, than the industry respondents. This suggests a lack of understanding among MPs of industry specifics, which is understandable, but needs to be acknowledged when communicating policy options.

Interestingly, neither group regarded industry structure as a solution to productivity.

This blind spot was in stark contrast to the views of experts and influencers who suggest that ‘solutions lie deep within the structure of the industry’ and its relationships within the economy as a whole.

“The suggestion inherent in many of the expert comments is that radical change needs to be made in the business models adopted by the industry and how the industry is structured,” reads the report.

“That clearly presents a very tough challenge and may mean looking at policy areas that currently seem less obvious to the industry and policy makers, such as the industry structure, organisation, research and new financial models.”

This conclusion was echoed in part by Labour MP John Spellar: “This report should provide a wakeup call, but it will require leadership from the Government which unfortunately, because of outdated dogma and lack of understanding of the industry, is unlikely to happen.”

He stressed that low productivity was raising the cost of housing, infrastructure, office and industrial space, having negative effects on inward investment.

“The causes are also ongoing,” he added. “Partly the cumbersome and time consuming planning process, the cyclical unwillingness of banks to invest and especially the casualisation of the industry. This makes it difficult to maintain teams, but most importantly to enable training especially of apprentices. As a result many companies live from contract to contract with little concern for the long-term future of the industry as a whole. This holds back the spread of best practice and particularly the development of off-site fabrication.

“Government encouragement of self-employment has been one of the driving forces of the atomisation of the industry.”

While the report makes a number of practical recommendations from its findings - such as tying public investment to training and job creation; developing new business models and financial models with incentives directed more towards productivity; and creating construction innovation and excellence hubs - it expresses two more fundamental concerns.

Firstly: we may be measuring productivity wrong.

The value of the design, the materials and components, and much of the plant and machinery used on site are not counted, and it’s difficult to measure improvements in quality or safety.

“The way the statistics are structured, it is quite possible to reduce the productivity of construction while increasing the productivity with which a building is delivered.”

For this reason it recommends better measures of construction to support better measures of construction productivity.

Secondly, and perhaps most importantly, it stresses that as the quality of the output construction produces generally boosts the productivity of the rest of the economy, productivity in construction should not be seen as an end in itself.

While construction productivity must improve, it must improve in such a way that enhances the productivity of the whole nation.

“The built environment that construction delivers influences every aspect of the lives of every person that engages with the modern world. It influences their health, education, effectiveness at work, their travel to work and how they spend their leisure time,” explains the author of the report and industry analyst, Brian Green.

“It impacts not just on the quality of life but the effectiveness of the economy. In other words – its productivity.

“An understanding of this should be at the heart of policy-making. Construction needs to be seen not just as a low-productivity problem, but as a solution, supporting a high-productivity UK.”

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