The Tories are pushing for a corporate takeover of the construction industry. The ‘Farmer Review’, completely pulls the rug out from small-builders and sub-contractors that have been working in the industry for more than 35 years. If the Construction Leadership Council has its way, traditional builds will be destroyed and replaced with off-site manufacturing that will collapse during the next recession, putting generations of skilled labourers out of work and onto the breadline.
Mark Farmer’s “Modernise or Die” review is a manifesto for the corporate takeover of the construction industry.
The review, commissioned by the government and undertaken by The Construction Leadership Council (CLC) completely pulls the rug out from small-builders and sub-contractors that have been working in the industry for more than 35 years.
Farmer is the CEO and founding director of Cast, a real estate and construction consultancy in London. The CLC was commissioned by the government to conduct the review and lay-out a blue-print for the future of the construction industry. So naturally they outsourced the gig to a giant of private industry.
In his recommendations, Farmer calls for replacing traditionally built houses with factory made prefabrications and wants government to create demand through policy measures. This includes having the Construction Industry Training Board (CITB) redirect its construction grants towards pre-fabricated housing, and taxing clients who choose not to use pre-fabricated solutions.
He also wants the CLC to have strategic oversight over the implementation of his recommendations. Queue the corporate takeover.
The CLC are basically a bunch of corporate bosses. No sub contractors and no small builders sit on the board of the CLC. Small builders and sub-contractors make up the vast majority of the workforce employed in the construction industry, yet they are not represented on the CLC.
How on earth can the CLC give oversight to any recommendations made by Mark Farmer if the majority employed in the industry are not included on its board?
Farmer also calls for the modification of the Construction Industry Scheme (CIS) to further disincentivise ‘false’ self-employment, ignoring that IR35 tax regulations already control false self-employment – not CIS – an unforgivable level of ignorance from a man who is writing a review about the construction industry. It seems he also wants to increase the CIS tax levy on sub contractors.
He mentions poor productivity many times in his review, but never once mentions IR35. When government introduced IR35 in 1999, contractors immediately dismissed most of their sub contractors and employed their labour via employment agencies. This led to a fall in productivity and quality standards in the industry.
If I was writing a review of the industry the first thing I would recommend is scrap IR35.
If government listens to Mark Farmer, the UK construction industry will be decimated and these are the reasons why:
The construction industry is cyclical, it has booms and busts. This is not the construction industry’s fault, this problem – which Farmer fails to address – is mainly due to poor credit allocation by the UK banking system.
Unlike traditional builds, pre fabrication cannot cope with boom bust cycles. A factory has to produce finished products in great quantity to continue to be financially viable. A factory can be mothballed for a few weeks or months during a recession, but not for any length of time.
Just look at what these boom bust cycles have done to our once great industrial heartlands. The factories were closed and they never reopened again.
Traditional builds can cope with these cycles, it is the reason the industry is made up of thousands of self-employed, sub-contract tradesmen and women. When a bust happens, contractors can shed their workforce rapidly. In effect the industry goes into hibernation. When the bust is over the workers are hired again. It is not an ideal existence but it is necessary given the dysfunctional state of the UK banking system.
If Mark Farmer and the CLC get their wish, traditional builds will be destroyed and replaced with off-site manufacturing that will collapse during the next recession.
After that we will be left with little ability to build our own homes or infrastructure.
I am not against pre fabrication, it does have its place in the construction industry. However the research I have done suggests that the Government, the CLC and Mark Farmer are deliberately creating a skills shortage and productivity problem in traditional builds, driving up costs in order to promote pre fabrication.
Hundreds – if not thousands – of construction jobs are at risk, the wages these tradesmen and women earn provide a much needed income to our local communities. The destruction of traditional builds will also devastate the local construction supply chains. Factory prefabrication does not need local building suppliers and local delivery services.
Farmer often uses the analogy of car manufacturing to support his push for prefab housing. He identifies the ability to order the car you want to exact specifications. However he neglects to mention that car companies void their warranties if the customer makes modifications. Similarly, prefab manufacturers will likely void any guarantees if anyone other than themselves modifies or extends these prefab homes. Home owners could well end up paying through the nose for future extensions and alterations.
It is the government’s own regulations and policies inflicted on the construction industry that has led to the decline of house building. Small construction companies have been locked out of buying public building land. Land is sold in large parcels with outline planning permission for hundreds of houses.
Only large corporate companies can afford such a financial outlay. These companies often land bank, speculate and resell these parcels of land. Many parcels are sold with S106 planning clauses specifying percentages of affordable housing or community spending commitments. These clauses reduce the sale price of the land, however in many cases developers use viability studies to remove their S106 contractual planning agreements. This excellent article by the Bristol Post highlights the scale of the problem. It recently published previously secret documents from Bristol City Council that developers had used to deny the public affordable housing.
Recent research by housing charity, Shelter, revealed that 2,500 affordable homes were dropped from developments in a single year, including 196 in Bristol.
The IR35 false self employment tax has removed the ability for many sub contractors to work directly for the contractor, adding another layer of unproductive employment in the form of employment agencies and umbrella companies. This has also starved workers of CITB grants for training, while the Construction Skills Certificate Scheme (CSCS) has pushed additional training costs onto workers, creating a labour shortage in the industry.
In any case, research conducted by YouGov on behalf of Hudson Contract revealed that only 9% of SMEs reported receiving CITB funding for staff training, and of that 9%, only half received the full cost of training. More than 60% of levy payers provided training without any grants or funding from the CITB.
According to the report, SMEs pay levies that are twice the cost of what larger firms are required to pay, yet have less power to influence the CITB. Anfield said analysis of the CITB’s own accounts show that large businesses receive a 92% return on their levy payment, whereas small and micro sized businesses receive 61% and 52% respectively.
I contacted the CITB earlier this month to find out how many grants were issued for sub-contract employment agency workers employed via umbrella companies. I did some percentage calculations based on the data sent to me by the CITB and compared them to the percentages published in this article. The results are truly shocking. The data revealed that large construction companies get a 92% return on their CITB levy, small construction companies get a 61% return and micro-sized construction companies get a 52% return. Umbrella payroll companies get a 5.6% return on their CITB levy.
Given all of the extra burden now put on construction workers’ shoulders, is it any wonder why they are 3.7 times more likely to commit suicide than the national average.
By adopting Mark Farmers review the Tories risk losing vital political support from small builders and sub-contractors who have traditionally voted for them.
I remember as a young apprentice the conservative government, rallying these supporters with the phrase “hands off the building industry”, in response to Labour’s calls to nationalise the industry.
Today’s conservative government wants to sell out these traditional supporters to the corporate elite of the construction industry who have invested heavily in prefab housing.
Supply of land is the Achilles heel of these prefab corporates. Pressure needs to be put on local governments to sell public land in small building plots, allowing local builders the chance to compete.
With a level playing field, traditional builds can deliver far more quality and quantity of housing to society than any corporate prefabrication factory. The corporates on the CLC know this. I believe they have deliberately created this crisis in traditional builds for their own benefit.