Last edited 24 May 2017

Interview with Mark Farmer

In October 2016, ‘The Farmer Review of the UK Construction Labour Model’ was published, which concluded with the stark warning that the construction sector must ‘modernise or die’.

Commissioned at the request of the government, the report was authored by Mark Farmer, CEO of Cast Consultancy, a real estate and construction consultancy based in London. Farmer has more than 27 years of experience in the industry and specialises in residential and mixed-use development and investment.

Designing Buildings Wiki met with Mark Farmer for a wide-ranging interview that covered the worst-case near future scenario for construction, the skill shortage, the potential of offsite manufacturing, President Trump, and more...

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Contents

[edit] Current projects

Designing Buildings Wiki (DBW):

Is there a particular project that Cast are working on currently that you are most excited about?

Mark Farmer (MF):

If I was to pick one it would be the Build to Rent scheme we’re doing in Ferry Lane, Walthamstow - 400+ units developed as part of Legal & General’s joint venture with PGGM, a Dutch pension fund.

We’re in the process of organising the procurement at the moment, and are really pleased to be involved as it reflects what Cast are looking to do in terms of working with long-term, institutionally-backed clients doing interesting things. Legal & General’s separate pre-manufacturing venture makes them especially relevant in this context.


[edit] Man on a mission

DBW:

You’ve been described as the ‘man on a mission to change the construction industry’. Do you feel something of the weight of the superhero’s responsibility?

MF:

When I published the review back in October 2016, I was expecting the weight of responsibility to be lifted from my shoulders, and I’d be back to business-as-usual with Cast. It hasn’t been that simple, probably for good reason.

Over the last 4 or 5 months I’ve gone on the road and had a great opportunity to explain a lot more about the thinking behind the report. I do feel like I’m on a bit of mission; I realise changing things is not a ‘big bang’ process and there is a real need for personal industry-level leadership that, to be quite frank, I don’t see a lot of in construction.

It’s going to take time to influence people and get them to recognise the seriousness of the challenges our industry is facing. I do truly believe we are facing some unprecedented problems.

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[edit] The 'die' scenario

DBW:

Your report was called ‘Modernise or Die’. Obviously, the report focuses on what modernisation might look like, but what do you think the ‘die’ scenario looks like?

MF:

To the question of whether the construction industry would actually physically die, i.e. become inanimate, the answer is technically no, but the title depicts a journey toward potential non-recoverable debilitation.

If industry continues down its current path there’s the real risk that it will not be able to react in a way that a fit-for-purpose industry would do.

This is already manifesting itself in increasing problems going forward around certainty of delivery. A lack of predictability of outcome could make construction increasingly a very high risk venture for developers and investors. There could be a highly volatile labour market, with price shifts and fluctuating day rates for self-employed labour when there are shortfalls in demand.

Combined with the lack of training and apprenticeships, this could lead to the industry going into terminal decline.


[edit] Differences from Latham and Egan

DBW:

In your report, you call for ‘a culture change to boost collaboration and innovation’. The same thing was highlighted in the Egan Report, nearly 20 years ago. Are there signs that in another 20 years the industry will have made significant improvements?

MF:

Both the Latham and Egan reports majored quite heavily on the potential upside of grasping collaborative working. In my report, I talk about lack of collaborative working being a symptom but I don’t focus on that as being a solution. That was deliberate.

There are too many reports about behaviour, collaboration, supply chain excellence – none of them will change the industry’s course unless something is regulated which there is no government appetite for. My view is that you have to deal with some other organisational and process-related issues first, and if you get those right the collaboration is a by-product.

The catalysts for change now are ones that we didn’t have in 1994 and 1998, and we clearly have new threats as well as opportunities. Our industry tends to have a habit of only responding to negative stimuli, which is what could make the impact of this report different from previous ones, because in many respects the industry, I believe, doesn’t really have a choice anymore. The growing issues with human resources and attainment of consistent quality will start dictating the agenda for change.

The other thing that will make the implementation of this report different in the next few years is market disruption. If these new entrants with different delivery models can come into the market and prove themselves at scale – such as Legal & General’s housing factory – then it creates a disruptive effect through being a competitive threat to existing models. That sets out the next few years very differently from what perhaps has happened before.


[edit] Criticism of CITB

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DBW:

Your report was particularly damning about the CITB and recommended comprehensive review and reform. Have you seen signs that they have taken that on board, do they appear to be making those changes?

MF:

Even though my report was critical, I wasn’t suggesting we get rid of the idea of CITB. There are a lot of people who are tempted to disband the whole concept of it, whereas, for me, it was about re-purposing it.

CITB have announced changes in recent weeks, including a reduction to the levy rate, levy simplification measures, and so on. They’re facing an uncertain time, with a review being separately conducted by government, and a triannual consensus vote from industry later in the year. With all that's happening there’ll be the temptation to do something knee-jerk that makes it more popular. There’s a fundamental need, in my opinion, for CITB to act strategically and more joined-up, rather than creating a patchwork quilt of different initiatives.

They need to step back and properly consider how they’re going to overhaul themselves to deliver the training, not only for today, but for the future skills needed in 5-10 years’ time which will emerge from innovation.


[edit] Skills shortage

DBW:

The workforce is predicted to decrease by 20-25% over the next ten years. Surely something really drastic is needed to address this? Doesn’t the education sector have a major role to play as well, since construction isn’t sold to young people as an attractive industry to go into?

MF:

The industry needs a new narrative about what it is. If we’re trying to sell it as a career choice for youngsters today, we have to have a narrative of a modern industry fully embracing digital engineering; this looks like manufacture-led construction still combined with traditional site-based working. We need a suite of different options around how you might work in the industry.

There are a myriad of really good current school outreach initiatives at the moment being mostly led by people who are passionate about getting kids into our industry. However, they are all fettered by not being sufficiently able to project the image of a progressive 21st century industry doing things differently.

If we try and increase the attraction of the industry as it is now, we’ll hit a glass ceiling - with losing so many people year-on-year, and not having much time. So we need to be not only maximising the number of entrants, but maximising productivity so that we can do more with less, because I’m pretty certain we’re going to end up with a smaller workforce in the future, come what may.

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[edit] FE college funding

DBW:

FE colleges say they are struggling to meet current commitments due to budget cuts over the last few years. In terms of joined-up thinking, surely the government should be looking to expand funding in this area so that colleges can create more classes for trades training?

MF:

I completely agree, there’s a massive duty on government to enable the right courses to be funded, supported, and promoted in the right way.

We’re seeing a sea-change in popular opinion at the moment between the attraction of university as opposed to leaving school at 18 and pursuing a professional or technical apprenticeship course. More people, and their parents, are questioning the worth of a degree, particularly with the £9,000-a-year fees now.

The Post-16 skills plan has a big role to play in making sure FE colleges are fit for purpose and meeting the needs of industry, delivering new courses and skills. I’ve seen a great example of that with Dudley College which is currently building Advance 2, the first dedicated FE college for advanced construction techniques.


[edit] Survivalism and Brexit

DBW:

You’ve said that the industry has retreated into a ‘survivalist’ mode. Do you think that will be exacerbated by Brexit dominating attention over the coming few years?

MF:

The current economic climate is characterised by uncertainty, which construction is not good at reacting to. The risk is that if construction doesn’t see the demand profile in terms of workload ahead, then some of the thinking towards modernisation could go in the other direction and become more survivalist.

The government needs to ensure that construction can see its demand. They need to be clear on the infrastructure programmes being commissioned, and give more commitments. In housing, they need to demonstrate that they have the ambition to meet their new build targets. If the industry can see certainty around the demand, and medium-to-long term planning, it will be more amenable to investment.


[edit] Offsite construction

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DBW:

Do you think offsite construction and methods such as DfMA should be adopted for large-scale social housebuilding programmes until they are ‘proven technology’, and subsequently adapted for private housebuilding?

MF:

It’s a great opportunity to do that. I’m not blasé enough to think we should foist a new technology on a sector that’s had bad experiences of offsite methods in the past. My suggestion would be that the housing association sector should embrace the opportunity in a way they feel comfortable with, driven by new high quality delivery and precision engineering solutions rather than perhaps some of the systems and technologies they’ve had problems with in the past.

If you were to combine all the housing association demand profile across their programmes and aggregate that in an intelligent way, it would be a massive opportunity to show potential investors the industry demand at a single point.

Offsite manufacturing obviously gives speed, which is partly what housing associations want, but if that could be combined with certainty of quality then the housing association and also the Build to Rent sector could prove to the wider market that, with the advance of technology and BIM enablement, offsite means something different from perhaps even 5 years ago.


[edit] Housing white paper

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DBW:

Would you have liked to see the government formally commit to some of your recommendations in the recent Housing white paper?

MF:

I was relatively pleased with the level of recognition that my thinking has had reflected in the white paper. There were some express call-outs in the skills section that confirmed they’d read the review, understand the issues, and see a role for government in helping overcome some of those.

More generally, the more tenure-diverse market the White Paper now is promoting, supported by Build to Rent and affordable housing was a recommendation of my review to give more construction sector stability.

There were some very specific links to some of my recommendations, particularly in the modern methods and higher productivity/innovative working section of the white paper. The government is looking at how it might use the planning system to better enable offsite construction and is committing to working with the funding market to unlock the sector. These are both key recommendations of my review.

With what the HCA are doing through the Accelerated Construction Programme, and what the Home Building Fund will be doing to incentivise innovative SME developers and contractors, there is a great opportunity for the government to be a ‘market maker’ in terms of stimulating a sector from the public perspective so that the private follows.

It was always my ambition to try and pump prime modernisation extending to fiscal measures – stamp duty and so on. There’s no real fiscal measures within the white paper, but that’s not to say they might consider them in a future budget. So they could always do more, but on the whole I was happy.


[edit] Green and low carbon building

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DBW:

Do you think a similarly hard-hitting report is needed into the other area in which British construction needs to modernise fast – green and low carbon building?

MF:

Obviously we’ve been on this journey before, with an abrupt about-face. What’s pleasing is that in the interim period before the Housing Standards Review and the abolition of Level 6 Code for Sustainable Homes, the industry made big strides in terms of being able to achieve higher levels of fabric energy efficiency and embrace renewable energy solutions.

The reality is, some of the carbon objectives can actually be achieved through the modernisation measures recommended in my report. If you move towards manufacture-led construction, particularly around panelised or volumetric systems delivered in factories, you are inherently achieving a much greater level of energy efficiency. Whether we have the appetite in the UK for another big carbon initiative remains to be seen.


[edit] Next steps for the report

DBW:

What are the next steps for you now in terms of trying to implement the report’s recommendations?

MF:

I am committed to providing the further voice-over of my thinking behind the review to as many people and organisations as possible so that people understand the seriousness of what I think is coming.

For me, the biggest risk is that the review's objectives are threatened because people aren’t talking about the issues it raises, however uncomfortable for some. At the moment, I am glad to say that does not appear to be the case, and if anything I sense an acceleration of the modernisation agenda.

One of my ambitions is to keep the review high profile this year. Hopefully the ‘Modernise or Die’ strapline starts to take on a life of its own in terms of people and organisations leading and implementing different things which will lead to positive change


[edit] Client levy option

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DBW:

You advocated the imposition of a client levy if the industry is still showing no sign of real change. What sort of timeframe would you be looking at in terms of when you start to think, we need to use that ‘last resort’ option now?

MF:

In my review I suggest that’s something that shouldn’t really be considered closer than 5-10 years. It would be a shame if it comes to that because it would suggest that the industry hasn’t managed to sort itself out and we’ve got very deep problems. It’s very much an ‘Armageddon option’, a behavioural change agent.

Hopefully in the meantime, clients will realise that they can’t wait for that to happen, they need to do something differently. I’m pleased that just in the last few months there are lots of big developer clients who seem to be getting it. I think they are nervous about labour security in the future, and about predictability, and so are more amenable to looking at different methods anyway.

The prospect of the levy being used will hopefully dissipate if real industry change and disruption is initiated over the next couple of years. The acid test will be in 5 years’ time when we assess where the direction of travel is.


[edit] President Trump

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DBW:

Will you be watching closely the work of President Trump in terms of fulfilling his promises to revitalise American construction and infrastructure?

MF:

Yes, it’s really interesting point. What is clear is that there is some very protectionist policies coming out of the Trump administration around migrant labour, and yet the level of dependency of some parts of the US construction industry on migrant workers is high, on some sites it’s almost 80%.

What I’m keen to understand, and what has obvious read-across to the UK, is how Trump will deal with the issue of the migrant workforce, while at the same time massively increasing the infrastructure and construction Capex programme. I don’t know how you do that in a ‘big bang’ that I think Trump wants, but it will be quite interesting to observe from our point of view.

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