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Thursday, August 31, 2017
Lord Adonis recently generated headlines, and controversy, for his attacks on the UK’s University system, accusing Chancellors of “greed” and running a “fee cartel.” Well the Labour Peer has now, in his capacity as Chair of the National Infrastructure Commission, turned his attention to construction and the built-environment.
This week Lord Adonis, a non-executive director and public face of HS2, dismissed fears over low margins in the industry. We wouldn’t be concerned either, if our members and those working in the built-environment sector could boast, as Lord Adonis can as a promoter of HS2, a £950 per day/ £4750 per week profit margin.
As someone with five non-executive directorships, three trustee positions, two national chairmanships, two board memberships, a directorship, a paid consultancy role and paid public speaking engagements, he can certainly tell our industry a thing or two about margins – or perhaps how to maintain profitable revenue streams!
He also called contractor margins 'Indefensible' and says that companies need to be 'cut down to size.' Rob Driscoll BESA Director of Legal & Commercial stated “Lord Adonis’ words are not only insensitive and detached from reality, but display a dangerous lack of understanding that some political elites have when it comes to a keystone and vital enabler of the UK economy”. Construction and the built-environment permeate all areas of our society and economy, and yes, it represents a key enabler of Lord Adonis’ own portfolio, transport.
Rob Driscoll added “BESA would invite Lord Adonis to understand the subject matter properly; construction generates £89bn, infrastructure and FM £122bn and enable economic services worth over £597bn. But we are a fragmented industry and over 99% of businesses are SMEs. 25% of construction output is from the public sector with central government the biggest single client, so the case for public officials like Lord Adonis to show leadership in an industry on the verge of land-mark evolutionary and disruptive change is inarguable.”
Low margins and the practice of value engineering have been symptomatic failures in our industry since well before Lord Adonis received his life peerage in 2005. Lord Adonis added: “[Contractors] are still making a very good return from the public purse and it’s the job of the public sector, on massive projects like HS2 and Crossrail, to get value for money.”
Except that’s incorrect, as in 2012 Government legislated against procurement for purely value for money, in the Social Value Act, enabling public sector procurers to base decisions on wider social economic impact.
The erstwhile Transport Secretary believes ‘it’s a sign that the public sector is getting a good deal at last. Indefensible margins have been cut down to size, I’m not concerned at all.’ But we would ask him to help lead the change agenda rather than simply criticise from the sidelines.
BESA would be very happy to furnish Lord Adonis with a copy of the Farmer Review which, one year on, still coherently maps the landscape for change and lays the foundation for a built-environment sector deal to underpin UK industrial strategy. At this stage it would seem he is not interested in the issues which could preclude the success of the very industry which will deliver his precious HS2.
If Lord Adonis had seen our ‘Grenfell: What Are We Missing’ blog series, he may realise how dangerous and truly inappropriate his words are, given that paper thin margins lead to a cyclical lack of growth and investment in skills, R&D, innovation and consolidation within the context of a 4th industrial revolution. Squeezing the price to an unsustainable level also places pressure on procurement systems at the cost of integrity and safety as we suspect we saw in the recent Grenfell tragedy.
The built-environment faces unparalleled pressure to reform, modernise and improve, and is displaying a genuine appetite for progress. As someone involved with the National Infrastructure Commission, HS2 and skills and education, perhaps Lord Adonis would like to join these efforts and serve as a catalyst for change, rather than as a critic of 6.3% of the UK workforce. We would happily provide Lord Adonis with an introduction to the good people at the Construction Leadership Council if he would also like another perspective of how the industry is trying to improve.
Tim Rook, BESA Technical Director points out that: ‘The built-environment is a delivery mechanism for safe, comfortable and efficient workplaces, homes, schools, hospitals; not to mention a key driver of CO2 targets and tackling climate change. It is a shame Lord Adonis has proved himself a bit ill informed.’
BESA represent a lot of hard working and struggling companies and individuals that are vital to the UK economy and delivering safe and efficient buildings. The calls that we get from members are asking for advice on non-payment, retentions, late public sector payments and breach of contract, and of course how to ensure best practice and compliance.
In collaboration with the Electrical Contractors Association and Scottish Electrical Trade Association SELECT, a BESA survey recently showed almost two thirds (63%) of engineering services firms were not paid within 30 days by public sector bodies in Q2 of 2017. If you are in a glass house, don’t throw anything – especially when you have just publically annoyed the contractors that you will need to fix it.
BESA would like to offer an open invitation to Lord Adonis, at his earliest convenience, to meet our team – so that we might better understand one another. He would also be very welcome to join our National Conference in October, where he can make sure that industry specialists are aware of his position.
We have had calls from our members asking for clarification from the Labour Party, that Lord Adonis’ feelings are not shared by his Party, its leadership or their Shadow Cabinet. We expect such clarification shortly, and will let members know either way.
 Full information available at: http://www.parliament.uk/mps-lords-and-offices/standards-and-interests/register-of-lords-interests/
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