Scape Group, the public sector owned built environment specialist, has carried out the most comprehensive survey of the UK’s construction supply chain and revealed the true extent of the skills crisis.
The ground-breaking Sustainability in the Supply Chain report, which surveyed over 150 contractors, subcontractors and senior managers at public sector organisations, also examined supply chain stability, the tendering process and reliance on the public sector.
Skills shortage at breaking point
The report highlighted the stark realities of the skills shortage, with 58% of contractors and suppliers citing the shortage as negatively impacting the quality of their workmanship. This sentiment was amplified in the public sector, with an overwhelming majority (85%) of managers seeing the quality of their built environment projects negatively affected by the skills shortage.
Over a third (35%) of public sector managers felt that the skills shortage was ‘bad’ or ‘severe’ in their area but it was SMEs who are noticing the problem most acutely – with 85% seeing a shortage in their area.
It is not just the quality of work which is suffering, 80% of public sector respondents and just under 40% of contractors and consultants see the skills shortage as negatively impacting their ability to keep to budget. With bricklayers in the UK earning as much as £1,000 per week due to the shortage of skilled workers, it is clear to see the crisis now risks destabilising the industry as a whole, indeed 42% of public sector managers highlighted it as one of the biggest barriers to a sustainable supply chain.
Mark Robinson, Scape Group Chief Executive, comments:
“Our research has shown that the skills shortage is at breaking point, not only severely impacting the quality of what we are building but also our ability to build it on budget. While there is a mountain to climb to overcome this challenge, basic recommendations can be put in place to ease the burden, for example, 19% of contractors and subcontractors still do not have an apprenticeship scheme.”
A healthy supply chain? The private/public juxtaposition
The report clearly shows the vast division between the public and private sector when it comes to how they define a healthy supply chain and what their primary aims are. Within the private sector, long term operational stability was the core aim (72%), minimising waste and recycling came in second (63%), then supporting local economies (58%). When asked what makes a healthy supply chain, 67% of respondents said stable pricing, while 63% cited stable employment patterns as key.
Within the public sector, 70% of those surveyed felt that providing long-term benefits for the local economy should be one of the biggest priorities. This same sentiment was echoed when asked about what makes a healthy supply chain, with 67% believing local skills and suppliers is the most important element.
Mark Robinson, Scape Group Chief Executive, comments:
“Now more than ever we need to work more closely together in order to deliver for both the public sector and SMEs. We can only achieve sustainable levels of efficiency through a perpetual focus upon true collaboration, partnership and greater engagement with all stakeholders.”
Which are the top three most important elements of a healthy supply chain?
|Public Sector Managers||Contractors, suppliers & consultants||SMEs|
|Stable employment patterns within the supply chain||29%||62%||68%|
|Stable pricing for contracts||54%||69%||52%|
|Investment in skills and training||46%||45%||48%|
|Using local area skills and supplies||67%||22%||40%|
|Time efficiency of delivery programmes||42%||48%||40 %|
|Cost efficiency of delivery programmes||42%||41%||40%|
|Contributing socially to the areas you work in||13%||7%||16%|
|Contributing to the development and regeneration of the areas you work in||8%||18%||16%|
|Contributing financially to the areas you work in||0%||6%||20%|
Of the respondents, SMEs found the public sector tendering process the most difficult, with 51% not feeling well informed about future public sector contracts. Currently only 7% of SME suppliers are aware of public sector projects more than 18 months before they can bid for the work, and almost a quarter (23%) of SMEs would like to know about contract opportunities up to two years before the contract is due to start. This major challenge for SMEs is one that could be addressed by the public sector and the industry through digital means and coordinated meet the buyer forums.The report has also shone a light on the communication challenges between the public and private sectors, with 75% of suppliers believing the public sector needs to do more to engage with its supply chain, and 80% of public sector managers agreeing. Forward visibility of upcoming projects represents a consistent challenge, with 68% of the contractors and suppliers surveyed typically bidding for work 6 – 12 months before a project or contract starts, but as many as a third (33%) believing they should be able to bid for opportunities up to 18 months before the contract starts.Tendering process
Reliance on the public sector
The public sector funds more than a quarter of the business for 64% of contractors and suppliers interviewed. When broken down further, it is clear that SMEs rely more heavily on the public sector, with over a quarter (26%) of companies stating it funded more than 50% of their work.
In the wake of Brexit, access to the public sector construction pipeline is more important than ever. During the 2008 recession private sector construction output dropped by 25% between 2008 and 2009 and it was the public sector which propped up the industry.
Mark Robinson, Scape Group Chief Executive, comments:
“Given the current economic uncertainty the £30billion of public sector construction activity is a vital stream of revenue for the sector and early signals from the new government that austerity measures might be eased would be welcomed across the board.”
1) Addressing the skills shortage.
Throughout the survey, the skills shortage resonated as the most serious barrier to growth and efficiency within the industry. While there has been a drive to increase the number of apprenticeships, more needs to be done. We also need to address the gender gap within the industry which is acutely pronounced. Both the public and private sector have a responsibility to ensure that more attractive opportunities are available to young men and women, from a diverse range of backgrounds, and these need to be communicated more effectively through well-constructed education programmes and with the support of the media.
2) Greater forward visibility of project pipelines to support SMEs.
SME engagement is vital in generating long term financial security in the UK. While the complexity of contracts, high capital investment and risk profiles create a challenging environment for SMEs, our survey has shown that if tenders were made public more than 18 months in advance it would allow SMEs the time to plan ahead, form partnerships and increase the likelihood of a successful bid. It would also allow for more stable employment patterns, resulting in increased stability in the pricing of contracts across the whole construction industry.
3) Greater collaboration between the public sector and supply chain.
Greater public sector engagement with suppliers, especially SMEs, will create a stronger supply chain and support efficient delivery. However, there is a mismatch between what the public sector believes to be important and what the industry believes is necessary. Consistent and forward looking digital communications, driven by government, would make it easier for the public sector to engage with SMEs and make information about opportunities more accessible. Open access meet the buyer events will also be critical in addressing this situation.
4) The importance of local spend and social value must be communicated.
The public sector, by its very nature, must deliver greater social value through its supply chain and this is balanced alongside the increasing pressure to deliver savings and achieve more with less. The supply chain is the vehicle through which the public sector can deliver this extra value and there are greater opportunities for those who understand this key aspiration. However, our survey has shown the public sector needs to clearly communicate the value of local spend and present tangible results which suppliers can relate to.
Rob Holt, Managing Director, Carillion Community Services, who operate Scape’s National Facilities Management Framework, comments:
“To generate local employment, boost local economies and help us to engage with the communities in which we work, we’ve set tough targets to work with local suppliers in delivering work under the Scape National Facilities Management framework. With a supplier spend of around £3 billion, Carillion firmly believe our supply chain partners can help us to make a real impact in supporting the UK economy. But, as this report has shown, they need our continued support in order to be able to do so. Using these insights will therefore enable us to look at the practical ways in which we can all work together to assist the supply chain in achieving success.”
Dean Banks, Managing Director of Construction Services at Balfour Beatty, Scape’s partner on the National Infrastructure and Civil Engineering Framework, comments:
“Scape’s research reveals a widespread focus on sustainable construction; that means supporting local businesses, inspiring a diverse group of talented individuals into the sector and ensuring the future demand for skilled labour is met. We are committed to delivering this as part of the Scape framework and as part of our work with ‘The 5% Club’, creating numerous opportunities for young adults and transforming the fortunes of young, talented people in the UK.”
Rick Willmott, Group Chief Executive, Willmott Dixon, Scape’s partner on the Major Works framework, comments:
“I am extremely proud of Willmott Dixon’s achievements through our partnership with Scape, our shared values have allowed us to focus not only on offering efficient and cost-effective solutions but also on adding lasting value to the local communities we work in. Our common focus on SME engagement and growth has seen us set and achieve challenging targets for local spend. We are not complacent though and will continue to set a high benchmark that I hope will inspire other companies in our sector as we all use our economic influence to drive growth in the local supply chain.”
Peter Young, Kier Executive Director, Building UK, comments:
“This research offers important insight into the benefits of working collaboratively with local suppliers to create a long-term, sustainable supply chain. Kier is committed to working with local businesses and suppliers in the communities where we work, which spans projects nationwide from Aberdeen to Truro. Over the last five years working with Scape, we have delivered 70 percent of project spend within 40 miles of site, with almost half of our workforce living within 20 miles of our projects, clearly demonstrating our commitment to supporting the local economy and the valuable role that a key framework can play in facilitating local spend and social value.”