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鈥淎s a chief executive of one entity, your ability to influence the industry is quite minimal. You鈥檙e just a pawn in the game.鈥� Andy Steele is explaining why he has decided to take on the chairman鈥檚 role at Build UK, the industry trade group credited with having played a key role in helping construction to navigate its way through the pandemic last spring, when the prospect of the first looming lockdown sent a collective shudder through it.

Steele, who is also the chief executive of Osborne, is honest enough about the task ahead and pulls no punches when discussing the state of UK construction right now. 鈥淭he business model is broken,鈥� he says.

鈥淵ou can鈥檛 have an industry that can鈥檛 invest, has an ageing workforce, businesses constantly going out of business, while those who remain struggle from losses to a little bit of profit and you have a supply chain that鈥檚 fragmented and fragile.鈥� As in-trays go, then, Steele鈥檚 seems frighteningly full 鈥� and he is only a few weeks into the job.

You can鈥檛 just turn the labour tap off and not expect any impact. There needs to be an understanding of what the industry requires

Andy Steele

For those who might think that this is being a bit bleak, consider the events of the past few weeks. The panic at the pumps 鈥� caused by a shortage of HGV drivers to get petrol to garage forecourts in the first place and then turbo-charged by panic buying 鈥� has for many held up a mirror to what is coming down the track for the industry. Steele thinks the government will have to rethink its shortage occupation list to include construction, now that the UK has left the EU for good. 鈥淵ou can鈥檛 just turn the [labour] tap off and not expect any impact. There needs to be an understanding of what the industry requires.鈥�

He says the government鈥檚 line about turning the UK into a high-skills, high-wage economy misses the point. 鈥淲hat about the now? It鈥檚 not a quick fix. To get labour to the level of skill needed will take a number of years.鈥�

Too white, too male, too many antisocial hours, too much hard graft 鈥� perceptions about construction count against it among young people, Steele adds. His assessment is blunt: 鈥淲e need to be able to attract more people, to be able to train them into an industry that is not attractive to a lot of people.鈥�

Hard graft, low profits

Last week, listed civils and building contractor NMCN went into administration after 75 years of trading, weighed down by crippling losses on several schemes 鈥� which had held up the publication of its 2020 results on which a rescue deal had hung. A company called Svella was waiting in the wings to sign off a refinancing package, but even a business set up to bail out stricken firms exactly like NMCN could not get it out of the mire. Steel firm Cleveland Bridge, which has been going even longer, has sunk as well, with an auction to sell off equipment and assets from its Darlington factory due to take place in November.

And, this month, Osborne itself filed a set of accounts which again showed up the yo-yo nature of the industry鈥檚 finances. The firm went from a 拢4.5m pre-tax profit in the year to March 2019 to a 拢13.8m loss in the 18 months to September last year. 鈥淓xtremely disappointing,鈥� admits Steele.

But it doesn鈥檛 have to be like this, he says. 鈥淐onstruction is massive. If our industry is not thriving, then the country is not thriving. It is the  second-most important industry out there. Food is about surviving, the built environment is about shelter. Nothing exists without our industry.鈥�

A QS by background, Steele is undoubtedly a fan of the industry. He started out at Osborne before stints at Mowlem, later bought by the now defunct Carillion, Morgan Sindall, the star performer among listed contractors, and Connaught, another listed firm which went into administration in 2010. Steele, who was a managing director at the Exeter-based firm, had left the business some years before, at the end of 2005, after disagreements with the then senior management over its future strategy.

He was headhunted to run a South-west-based law firm called Stephens Scown for nearly five years before setting up his own consultancy business specialising in law. He received a call from Osborne鈥檚 then boss, David Fison, to carry out a strategic review of the business in 2012 and was asked to stay on. He became managing director of its construction business the following year, ahead of taking the chief executive鈥檚 role six years ago.

In all that time, he says that the number one concern has remained the same: construction鈥檚 pipeline of work. 鈥淗ow can any construction company ever invest, ever understand what its future workload is going to be unless it has got security of pipeline?

鈥淏asically, at the moment, it鈥檚 just a combination of projects which ebb and flow. It takes 12 months to convert a second-stage bid because of budget issues, and there is the constant value engineering 鈥� which it isn鈥檛, it鈥檚 cost reduction.鈥�

Steele is not alone; his peers are saying the same thing. 鈥淭he UK鈥檚 predicted pipeline of work is very strong, but industry requires much more certainty around when and how major infrastructure will be phased and delivered,鈥� says Aecom Europe chief executive Colin Wood.

Gamechanger

But there is hope, reckons Steele. 鈥淭o me the Construction Playbook is a fundamental gamechanger. It鈥檚 the first thing I have seen that says: look, guys, these are the issues and this is part of the solution.鈥�

Launched last December, the initiative is the government spelling out how it wants to work with the industry in the future. Steele adds: 鈥淭he Construction Playbook is trying to turn a pipeline of work into a portfolio of work. Then we can look at economies of scale, driving efficiencies in design and production, and look at offsite as part of the solution.

While he thinks the government has got it right with the Construction Playbook, he worries that an industry at the heart of the Johnson administration鈥檚 levelling-up agenda and post-covid build-back-better initiative still does not have enough clout in Whitehall. 鈥淚t has been  something like 21 construction ministers in 20 years,鈥� he laments. 鈥淭hat鈥檚 not a great place. I don鈥檛 think construction has a high enough profile in government 鈥� it鈥檚 too fragmented across government.鈥�

He says that if the government starts to take it more seriously, then others will as well. 鈥淚f the supply of work is coming through, then as an industry people will invest in us. Construction is not liked by the banks. If we can鈥檛 borrow or invest, then we鈥檙e reliant on profit.鈥�

Steele echoes many when he says that the industry spends too much time reinventing the wheel. 鈥淲e need standardisation of design and components. We can still have architectural flair, but we don鈥檛 have to build something from scratch every time.鈥�

Called Innovar茅, Osborne has its own offsite manufacturing arm based in Coventry, where around 80 staff are employed. But Steele says the complex is subject to the same pipeline of work headaches as the rest of the industry.

鈥淥ur biggest challenge is: when is a project going to take place? We can have massive peaks and troughs, which make it very difficult to manage. You have very fixed overheads with offsite, and it can be very, very difficult to flex that.

鈥淚t鈥檚 either feast or famine, and it doesn鈥檛 work in a manufacturing environment. How can we invest in MMC when we have got that level of inconsistency?鈥�

It all comes back to the pipeline of work, Steele says. 鈥淕etting better transparency of workflow means we become attractive; we can start to sort out the skills issues. There has to be a better balance between risk and reward. As an industry, we鈥檙e saying to the customer: we don鈥檛 want to take all that risk.鈥�

I don鈥檛 think any CEO or owner of a company would not have been scared by the outcome of Grenfell. If you are involved in the industry, you can see how this happened 鈥� that鈥檚 the scariest bit

Andy Steele

Trying to cut corners to save money can have horrific consequences, he says, adding that the Grenfell Tower fire, in which 72 people lost their lives more than four years ago, is a case in point. 鈥淚 don鈥檛 think any CEO or owner of a company would not have been scared by the outcome of Grenfell. If you are involved in the industry, you can see how this has happened 鈥� that鈥檚 the scariest bit.

鈥淚f you鈥檙e under financial pressure on a scheme and somebody has promised an alternative solution, you think you鈥檝e done the right thing, people have signed it off and it鈥檚 turned out to be something that is fundamentally wrong, as in that case.

鈥淵ou might be shocked by some of what鈥檚 come out in the details [of the public inquiry into the fire] and how cavalier some of the responses [at the inquiry] have been but, equally, you hope that your internal governance processes are strong enough that it wouldn鈥檛 have happened in your company.鈥�

All this change is required because of the spotlight thrown onto the industry by issues such as Grenfell, Brexit and the covid-19 pandemic, Steele says, adding: 鈥淧eople are moving past covid now. We鈥檙e starting to look at what that means in the recovery stage and how to move the industry forward.鈥�

He might have been in charge of a group of lawyers at the time, but Steele says the financial crash of 2007-08 does not compare with recent events. 鈥淐ovid was worse. It stopped production.鈥�

He is hoping that, when his two-year tenure ends, he will have made some inroads into that mountainous in-tray. He plans to bring clients into Build UK but has sharp words for them as well, pointing out that too many are still 鈥渆xpecting to get their buildings built for the same budget鈥� in the wake of rising labour and materials costs.

He saw the good and bad of clients during last year鈥檚 first lockdown, as contractors and clients up and down the land sought to work out who was liable for what. 鈥淭he bad ones were bad: they鈥檇 say it was tough. The good ones were quite good.鈥�

Steele ends with something close to a parable to make the point about the kind of change that construction needs to be embracing. 鈥淚f we go into a green field to build something,鈥� he says, 鈥渨e basically get a team of designers we may not have worked with before and then we get a fragmented supply chain, some of whom will come into the field and others who will be outside it. If that was the motor industry and they were building a car, they would call it a prototype. When we do it, it鈥檚 the finished product.鈥�