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Off-site Manufacture for Construction (Science and Technology Committee Report) - Motion to Take Note

Part of the debate – in the House of Lords at 4:34 pm on 12th December 2018.

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Photo of Lord Renfrew of Kaimsthorn Lord Renfrew of Kaimsthorn Conservative 4:34 pm, 12th December 2018

My Lords, as a member of your Lordships Select Committee on Science and Technology, I must begin by thanking the noble Lord, Lord Patel, for his skilful chairmanship. I also thank the committee’s officials and special adviser for their thorough and efficient work. I should also mention that it was the noble Lord, Lord Mair, who encouraged us to pursue this theme and write our report, so it is a pleasure to follow him this afternoon.

Certainly it is clear that the construction sector has not delivered the same level of productivity as other sectors of the economy in recent years. On average since 1997, labour productivity in the construction industry has consistently been around 21% lower than in the wider economy, and there are certainly indications that the Government may find it difficult to achieve their target of building 300,000 houses per year by 2020.

The focus of the committee’s report is on off-site manufacture for construction, which implies factory production for the components produced and offers the hope of a smaller on-site workforce for their installation and much less on-site wastage and disruption. It is fair to say that the committee was greatly impressed by the benefits off-site manufacture and felt that the claims of its advocates were in most cases well justified, but we had a much harder time trying to work out why the model is not more widely adopted.

The benefits accrue largely from economies of scale, where the factory-made components can be delivered to a range of sites. Skilful planning can introduce variety and avoid the impression of sameness and monotony that many of your Lordships will remember in the prefabs of the immediate post-war period. In general the Government have been alert to the merits of off-site manufacture and ambitious in their construction sector deal, whose objectives were announced in November 2017 in the Government’s Industrial Strategy White Paper. They included a 33% reduction in the costs of construction, a 50% reduction in the time taken from beginning to end of new build and a 50% reduction in greenhouse gas emissions in the environment. These same targets had been set out four years earlier in the Government’s Construction 2025 strategy. The Government indeed published their construction deal in July 2018 setting out three strategy areas to meet these objectives. They were digital techniques to be used in all phases of design, off-site manufacturing technologies and whole-life asset performance.

Our report was published on 19 July this year, and the Government’s response, which was in general welcoming, was promptly published on 14 September. There is no doubt that the Government are well aware of the merits of off-site manufacture and well disposed towards it, but there is a very real question as to whether that is enough. At present, as the report makes clear in paragraph 107, the up-front finance required to set up off-site manufacture appears greater than the finance required for conventional construction. The Government’s response is positive:

“Where gaps are identified, the Government will work with stakeholders to address these, to ensure that the industry has access to the finance that it needs to expand its off-site manufacture capacity”,

but is that enough? It is perhaps a shade vague.

It is clear that constructors and housebuilders which fall into the category of small and medium-sized enterprises—that is, they employ fewer than 250 persons —are not in a good position to employ off-site manufacture, usually being too small to do so on their own. It will take a considerable disruption in the low-rise residential construction sector in the United Kingdom to bring it to adopt off-site manufacture. Currently, we were told that in that respect the UK is,

“substantially behind Scandinavia, North America and Japan”.

However, we were told that such a disruption in the construction sector is,

“most likely to come from overseas, and perhaps from China”.

Those observations are covered in paragraphs 58 and 59. That is perhaps a shade disquieting.

As we have heard, in his November 2017 Budget, the Chancellor announced a presumption in favour of off-site construction across suitable capital programmes where it certainly represents value for money. The committee’s report lays considerable weight on that presumption and emphasises the need to ensure a consistent pipeline of projects. Without this, the industry will not have the confidence to invest substantially in off-site manufacture.

There is, of course, very much more that could be said. It is fair to say that the committee was unanimous about the merits of off-site manufacture for construction. The Government have been consistently forward-thinking in their construction sector deal, but they will need a consistent policy in procurement where public projects are concerned if the promised benefits are to be secured.