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Meeting the productivity challenge

This month Martyn Jones asks what we should make of the recent flurry of economic data and what it reveals about our growth and productivity?

As the think tank UK in a Changing Europe (UKICE) puts it: “The UK’s economic performance … has been at best mediocre. While this is partly the result of policies such as austerity, and while Brexit has reduced growth, it also reflects long-standing structural weaknesses.”

The UK’s growth for 2023 was 0.1 percent, just avoiding a recession. But if we take per-capita GDP as a measure better reflective of the way our economy is performing, it fell by 0.7 per cent last year and is 1.5 per cent lower that it was at the time of the last election, and just ahead of formal Brexit.

The solutions to our low growth and productivity are well rehearsed: More business investment, greater innovation, and improved skills (particularly mid and lower-level ones), better infrastructure, and tackling regional inequality are usually top the list.

And there are strengths too that we in the UK can draw on to grow and become more productive: Political stability (although somewhat lacking recently), strong institutions, recent improvement in the performance of schools, the expansion of higher education, our world class universities, and the strength of our legal and financial services.

Then there are the opportunities for growth in the transition to a net zero economy, which presents unprecedented opportunities for the UK to become a more resilient and productive economy whilst also tackling climate change. In stark contrast to the rest of the economy, which at best is flatlining, economic data showing that the UK’s green economy grew by 9% in 2023.

Clearly the value of green industries like renewables, eco-friendly heating and energy storage is growing and will help unlock further cash for the UK, according to economists at the Confederation of British Industry (CBI). They argue private investment and an industrial strategy are key to unlocking growth and the transition to a green economy.

Are we in construction ready to play our part in raising productivity and transitioning to net zero? Our performance over the last several decades is not encouraging given our reputation for being among the lowest productivity sectors across the economy.

A report published in 2017 by McKinsey Global Institute stated that construction sector productivity has largely remained stagnant over the past several decades despite the technologies and new forms of cooperation presented by the ICT paradigm.

Meanwhile, in manufacturing benefitting from the technologies and ways of working sparked by the ICT paradigm, particularly by lean supply chain management, productivity has almost doubled during the same period meaning that a manufacturing worker can now produce twice as much in the same number of hours whilst increasing quality.

Are we in construction wilfully opposed to innovation and increasing productivity? Or is construction so different our productivity performance cannot be judged in the same way as other sectors of the economy: The perennial we are backward vs we are different argument.

Our culture is cited as a major barrier to change, often being described as traditional and averse to new ideas. And our market structure and operating system are seen as acting against innovation and raising productivity.

We lack the overall and consistent single-point of leadership that is evident in the automotive industry with major car assemblers leading and driving much of the sector’s innovation, raising productivity, and now leading the charge to net zero.

Much of the production in construction is still being tied to specific locations making it more difficult to industrialise. And conditions differ significantly for every client and building type, making flexibility and the securing of scarce resources more of a priority for us in construction than lean efficiency.

Then there is our all too often and deliberate separation of design and construction. Imagine this happening in the automotive industry, with every car buyer taking their own bespoke design drawings to a manufacturer.

So, what are the solutions? The results from a recent RICS Global Construction Monitor (GCM) survey offers some ideas in the ways the respondents answered one of their questions: “How do you plan to increase labour productivity in your business?”

At the global level, the following interventions on productivity were ranked as the top two: upskilling the workforce and greater investment in data/digitisation. The respondents to the survey ranked improving procurement and supply chain management in third place – implying more collaborative inter-organisational relationships, more seamless processes, and greater focus on internal and external customers.

Constructing Excellence in our regions is well placed to play a role in increasing productivity and capitalising on the opportunities in transitioning to net zero. Clearly our Theme Groups – Future Skills, Smart Construction, Climate Crisis all have a role to play.

And there is Constructing Excellence’s new Behavioural Framework: A tool providing a means for leaders from across the movement to model inclusive and collaborative behaviours and provide a means for reflection, dialogue, and action to drive a more collaborative culture and in doing so raise productivity and support our transition to net zero.

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