Britain’s construction industry faces “inexorable decline” unless radical steps are taken to address its longstanding problems, according to an independent review commissioned by two Government departments.

The Farmer Review of the UK Construction Labour Model highlights construction’s dysfunctional training model, its lack of innovation and collaboration as well as its non-existent research and development (R&D) culture. Low productivity continues to hamper the sector, while recent high levels of cost inflation, driven by a shortage of workers, has stalled numerous housing schemes as they have become too expensive to build.

Mark Farmer, report author and chief executive of Cast, said: “The construction industry is in dire need of change. What is clear to me following the nine months spent conducting this review is that carrying on as we are is simply not an option. With digital technology advancements pushing ahead in almost every other industry and with the construction labour pool coming under serious pressure, the time has come for action. The construction industry doesn’t have the impetus needed for this change, it requires external action to initiate change.

One recommendation set out for the medium term is a “carrier bag charge” style behavioural deterrent scheme. This would levy a tax on businesses who buy construction work in a way that doesn’t support industry innovation or skills development. Clients could face paying a suggested levy equal to 0.5 per cent of a scheme’s construction cost but would have the ability to avoid paying this tax completely by commissioning construction in a more responsible way.

Commissioned by the Department for Communities and Local Government and Department for Business, Energy and Industrial Strategy, Mr Farmer has made 10 recommendations which include:

  • Using the residential development sector as a pilot programme to drive forward the large scale use of pre-manufactured construction, for example, through off-site built or modular housing.
  • A wholesale reform of the current Construction Industry Training Board (CITB) and its related levy system, including a new mandate to properly fund and drive forward both appropriate skills development and innovation to suit a modern progressive industry
  • Government to use its education, fiscal, housing and planning policy measures to initiate change and create the right conditions that will support the construction sector’s modernisation.

With more people leaving the industry each year than joining, the construction workforce is shrinking, placing increasingly severe constraints on its capacity to build housing and infrastructure. Reliance on a fractured supply chain and self-employment also means there is little incentive for contractors to invest in long term training for the labour force.

Industry Minister Jesse Norman said: “This Government is determined to support more housebuilding, more quickly and in the places people want to live. Given the launch of the £3 billion Home Building Fund, Mark Farmer’s important review in this vital sector is very timely. It makes a strong case for change in the industry, identifies areas where it needs to improve, and sets out areas for action. We will now carefully consider his recommendations.”

Paul Stanworth, Managing Director of Legal & General Capital, said: “This review sets out a clear way for the construction sector to reinvent itself in order to meet the ever-growing demand for homes and infrastructure.”

Ray O’Rourke, chairman and chief executive at Laing O’Rourke, said: “There is significant scope for radical transformation through the adoption of new technologies and advanced manufacturing approaches.”

Mark Reynolds, chief executive officer at Mace, said: “Farmer’s review makes it clear that the construction industry needs to invest in training and R&D to boost productivity and ensure we have adequate capacity to deliver the UK’s economic and social infrastructure.”