West Midlands Property & Construction Roundtable Series...Making a difference Summer 2016. Real Estate & Construction 1 The UK contracting industry has a reputation for creating robust,

Real Estate & Construction PREC ISE . PROVEN. PERFORMANCE .

West Midlands Property & Construction Roundtable SeriesMaking a differenceSummer 2016

1Real Estate & Construction

The UK contracting industry has a reputation for creating robust, sustainable and innovative structures in the built environment. However, in the consultancy industry, this is far from the case. We are a fragmented, disparate profession in which many professionals do not even fully understand each others roles.

Introduction

Contents

Introduction 1

Brexit 2

OJEU – Is it coming to an end? 3

West Midlands Combined Authority (WMCA) 4

Next Generation 6

Modular building 9

We lack:

• recruitment pipelines;

• information to publicise the industry;

• overarching professional structures;

• input into planning processes;

• strong industry-level links to central and local government.

This Moore Stephens RLB forum was created to identify these issues

and come up with some ideas to plug the gaps. We’ve taken the

debate forward in these areas and now the goal is to start setting

up structures and making representations that make a difference.

Earlier roundtable discussions brought out some of the key issues

facing construction:

• funding (including the inability to get funding for speculative

projects);

• the procurement process;

• planning bureaucracy;

• scarcity of suitable land;

• talent and the skills shortage.

These issues have been thrown into sharper focus by Brexit which,

despite its shocking immediate impact, is a clear signal that the

construction industry must now take action itself to remedy them.

There are tough times ahead for the industry but there are also

some golden opportunities emerging to build the foundations for a

sounder future. There are perhaps as many as 50 organisations who

speak for parts of the industry, but no clear message ever seems to

emerge. It’s time for the voice of construction to be heard.

This paper summarises and expands on the roundtable discussion

attended by representatives from AHR, BDP, Brooke-Smith Planning,

Built Environment Skills in Schools, Claremont Property Group,

Clugston, Colmore Tang, Cundall, Deeley Group, Mace, Squire

Patton Boggs, WSP and AHR.

2 Real Estate & Construction

Before Brexit, Moore Stephens’ Owner-Managed Business

Survey found that the construction industry as a whole had a

positive outlook, particularly compared to other sectors such as

manufacturing. Construction was confident: 43% of respondents

expected results to be better this year than last and 84% thought

the outlook was improving. A significant 74% said that staff

training was a high priority for them.

Now things have changed, and there is a lot of uncertainty and

gloom in addition to the annual summer slowdown. Investors are

waiting to see how the cards will fall, and making very conservative

portfolio choices. Funding for projects, which had turned a corner in

terms of confidence during 2015/16, is now uncertain both for EU

funding and within the UK.

Pre-Brexit tax rates were falling in the UK. Could this be good for

inward investment and foreign funding of more projects?

In addition, many companies are highly reliant on staff from the EU,

and need to know what their position will be after we exit

the EU.

BrexitBrexit has made the construction sector headline news, featuring on the front pages of many national newspapers. The views vary massively on the impact to the industry.

Uncertainty has been increased by an unexpected political reshuffle

which has replaced the ministers at the head of key departments,

such as Chris Grayling as Secretary of State for Transport. Many of

these ministers are unknown quantities and doubts are reemerging

even over projects like HS2 which appeared to be settled.

The key question is whether Brexit is being blamed or used as an

excuse? The RICS announced that house prices are falling,

particularly in London and the South East. This may be a result of

Brexit or may have happened anyway as a market correction.

Paul Fenner (Moore Stephens), Nigel Mason (RLB), Louise Brooke-Smith (Brooke-Smith Planning)


OJEU procedures, such as the competitive dialogue process, are

seen as cumbersome, costly and time wasting. Clients are

frustrated and seek ways to get around it.

But OJEU is a double-edged sword. OJEU is also a very robust

process, and the UK’s reputation for playing by the book has

contributed to making the UK an attractive and safe place to

invest.

One possibility is that OJEU will be replaced by a more widespread

adoption of framework arrangements. Whatever replaces it will still

need to satisfy a number of criteria to protect public finances.

However, the replacement will need to not only make the process

faster but still retain its robustness.

Another alternative is a new, more trust-based system, where

people ‘just get on with it’. Potentially this could lead to

a new ‘old boy network’. Maintaining the ‘wildcard’ element

would be necessary to ensure that new approaches and innovative

technologies are encouraged.

OJEU – Is it coming to an end?

Action pointsCivil servants and ministers should engage with construction

firms as they shape new policies.

• identify and share conduits through which the construction

industry can influence government;

• collate evidence which can be used to shape a replacement

for OJEU;

• Lobby professional bodies such as the Construction

Leadership Council, RIBA, RICS, etc.

Nigel Mason (Rider Levett Bucknall)), Louise Brooke-Smith (Brooke-Smith Planning), Paul Fenner (Moore Stephens)

Kathryn Lennon-Johnson (Built Environment Skills in Schools), Peter Deeley (Deeley Group), Karen Evans (WSP)

Rationalising the OJEU procurement process could be helpful for construction as well as for government as it tries to get infrastructure and other big projects under way.


Devolution is happening, but many of the bodies in construction are

still too London-centric. Newspaper headlines are dominated by the

effects on London property funds. As the only net exporter, the West

Midlands issues are markedly different from other regions.

The region has very strong links to tiger economies like China and

India, not just the EU. It’s important that the region separates itself

from the more London-centric issues such as property funds that are

dominating the front pages and grabs the opportunities.

It is very early days for the WMCA with a ‘battle royale’ to come over

the mayorship, which will almost certainly go to a political party

representative.

West Midlands Combined Authority (WMCA)The WMCA will cover twelve local authorities and three Local Enterprise Partnerships working together to move powers from Whitehall to the West Midlands.

Brexit may have come as a blow but the WMCA still has a clear

remit: to improve the health, wealth and well-being of everyone in

the region and to help businesses grow and prosper. The real estate

and construction industries will be crucial to that mission.

Much that is positive has already emerged, for example the new level

of coordination and collaboration between the universities.

But a lot is up in the air: will the new Mayor have the ability to grant

planning permission, or the right to sell public land? As a body what

powers does WMCA have?

MIPIM is a powerful event for the construction sector. Going

forward we need to know how MIPIM can help the WMCA

construction companies as a unified body and the synergy with the

Midlands Engine.

The goal seems to be that the mayor will gain similar powers to the

London Mayor: to call in planning applications, to override them,

to identify housing improvement areas and so on.

“ Brexit may have come as a blow but the WMCA still has a clear remit: to improve the health, wealth and well-being of everyone in the region and to help businesses grow and prosper. The real estate and construction industries will be crucial to that mission.”


With the Mayor having responsibility for transport, regeneration and

the economy, it seems sensible to also include planning.

But the WMCA itself acknowledges that it faces a ‘democratic

deficit’. The conduits are complicated, with the structure of Mayor’s

role, the combined authority, LEPs and local authorities having been

compared to Russian dolls.

This poses a conundrum for the construction industry: we need to

make strong representations about how our voice should be heard.

Housing will be a key issue for the region. Public land needs to be

freed up for housing. The planning system will need to be made, not

just more efficient but more consistent, so that developers and

investors know what they are dealing with. In a volatile market

shifting values can undermine finance and mortgage deals – speedier

planning may be the key to preventing a slowdown in development.

Movements towards a zone-based system by 2020 with a

presumption favour of planning should be welcomed. The disparity

between normal procedures and permitted development is glaring.

Section 106 requirements, social value clauses are not only

onerous; they are often not followed up upon.

Planning also needs to be seen in the context of wider development.

If construction can find the land and get the planning, will there be

the road and utility capacity to cope?

Action points• Identify the conduits for construction to work effectively

with WMCA.

• What should be the main point of contact?

• What form should it take?

• Are new structures needed?

• How do we as the construction sector help shape how the

WMCA works?

“ Planning also needs to be seen in the context of wider development. If construction can find the land and get the planning, will there be the road and utility capacity to cope?”

David Walker (Cundall), Daniel Barchet (Squire Patton Boggs), Andy Robinson (Claremont Property Group)

Susi Powis (AHR), Debbie Ward (Clugston), Kathryn Lennon-Johnson (Built Environment Skills in Schools)

Dan Smyth (BDP), Simon Lamprell (AHR), Peter Deeley (Deeley Group)


Built Environment Skills in School (BESS) is the only digital

marketing platform representing the entire construction sector,

combining gamification, 3D modelling, virtual reality, simulations,

augmented reality, apps and social networks to reach young

people in a “language” they’ll understand. BESS doesn’t duplicate

any of the existing construction skills initiatives. Rather,

it links these initiatives with content created by employers,

educators, industry bodies and the young people themselves

within a digital pathway to apprenticeships. Academic study, work

experience, mentors, careers information and skills. This

connected, holistic approach provides a logical pathway that

young people can navigate easily and clearly.

BESS has access to more than 24,000 schools, with the addition of

higher education facilities and job centres, this equates to 13 million

young people being able to experience the work and innovations of

the sector.

The skills gap and aging construction workforce is well-publicised,

but this has had a negative effect in terms of social signalling.

Young people are getting the message that construction is not for

Next generationConstruction has long suffered from the lack of a unified body to talk to young people about the built environment. Built Environment Skills in Schools (BESS) is working to fill that gap.

them. In addition the construction industry needs to do more to

ensure that universities understand the relevance of construction

to their students’ career prospects and do not drop construction

course content out of fear of dropping down league tables.

Construction is a very fragmented industry when it comes to

educating the next generation. In areas like medicine and the law,

people are given a general grounding first, and then expected to

specialise in the light of that knowledge. Professional firms like

accountants rotate their new entrants through many disciplines

before they find a long-term role.

In construction the entry point is to a particular and often quite

niche specialism. Entrants may not know much about other

disciplines or possible career paths, and this ignorance can continue

throughout their careers. Previously schemes to ‘adopt a school’

have been tried but this leads to the large construction companies

joining with the leading schools in the region.

This early specialisation is reinforced by work placements, which

consist of a week at a single firm.

Action pointCreate networks and alliances that allow work placement

students (who have already self-identified as interested in the

built environment) to move from company to company and

different disciplines and trades, such as architects, surveyors

engineering consultants, etc.




To be successful modular building needs four main elements:

• Volume: there must be a high enough level of output to make

factories successful.

• Repetition: it must be truly modular, not just replicate a

construction site a few miles away.

• Continuity: as a highly cyclical industry can construction support

factories over the long term?

• Development: a large amount of time is needed during the

developing stage. It is difficult to have any changes or variation

once it has gone to the production stage.

The UK is seen as quite advanced in modular construction, with

much discussion around hotels and student accommodation,

prisons and also podded bathrooms. However, many are wary of

the risks; if construction is overseas then exchange rate risks come

in to play. Projects can be derailed by transport issues. Finance is

itself a challenge, with the need for upfront payments sitting

badly with traditional construction finance methods. Mortgage

companies and some institutional investors also do not like the

short life of modular units.

Modular building

With the UK’s lack of skilled workers, modular solutions seem to

be the only way we can tackle the housing crisis. And with

investors like L&G coming in, the sector could become the

mainstream. However, it is difficult for many investors to invest in

offsite manufacturing as it tends to follow the same ‘boom/bust’

cycle that the construction industry follows, making risk adverse

investors stay away. It will be vital to find ways to encourage

investment to move forward.

Can modular building and offsite construction help solve the issues facing construction? It potentially has a valuable role to play in the future, but fundamental issues will need to be resolved.

Action points• Central or local government measures to make modular

construction more feasible

• Solutions for infrastructure issues

• Identify different skills sets needed from the skills currently

being sort to progress modular building

• Effects of a post Brexit EU trade deal on the sector

Modular methods are not necessarily less expensive, but they are

radically quicker. However, the time advantage can be eaten up

by planning time and delays in connecting services: what we need

is modular infrastructure.

We believe the information contained herein to be correct at the time of going to press, but we cannot accept any responsibility for any loss occasioned to any person as a result of action or refraining from action as a result of any item herein. Printed and published by © Moore Stephens LLP, a member firm of Moore Stephens International Limited, a worldwide network of independent firms. Moore Stephens LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority for investment business. DPS33155 October 2016

Documents

West Midlands Property & Construction Roundtable Series...Making a difference Summer 2016. Real Estate & Construction 1 The UK contracting industry has a reputation for creating robust,