2021 brings with it a chance to reflect on the year just passed and an opportunity to look to the year ahead. After a truly extraordinary 12 months, it seems fitting to look to the oncoming spring for new year inspiration and change.
Brexit may be concluded but there's still much to be done. The UK government is a bullish participant in the economy and the construction sector. Its strategy is unashamedly to pump-prime the economy, but includes policy drivers, too. Expect public sector construction to help bridge the north and south divide, and to encourage private sector participation in the industries of tomorrow.
With this in mind, here are some changes that we think will be important in the year ahead.
Freeports: opportunities for developers from Brexit
In November 2020, the UK government published the Freeports Bidding Prospectus.
The freeports scheme allows the devolved administrations to apply for certain industrial "clusters" to be classed "outside" the UK for tax purposes. Goods can be imported into the freeport without paying duties or taxes, becoming due if the goods cross into mainland UK. The primary goal is to encourage manufacturing and R&D.
There's a push for new technology and innovation. An example is light-touch restrictions on field testing technologies – such as allowing the trial of autonomous vehicles – supported by a Freeport Regulation Engagement Network, which will promote nationwide acceptance after a successful trial.
There's also a green agenda. Applicants need to outline how achieving freeport status will help the government achieve its "net zero" carbon emissions 2050 ambitions. The scheme compliments the Treasury's Net Zero Review interim report and the BEIS Ten Point Plan for a Green Industrial Revolution, both of which point out that private sector investment and tech development need to be encouraged to achieve the net zero dream.
£175 million in seed funding for development is available, to be split amongst the approved freeport applicants. Further, evidence of investment into an area by applicants will be part of the selection criteria.
Construction tech
Although there's a recognised need for change to deal with shortages construction labour and skills due to demand from other sectors and the impact of Brexit, the adoption of technology in construction has historically been slower than other industries. Is COVID-19 the catalyst to change in 2021?
Site operating procedures have been changed to allow for social distancing, and it appears that most contractors have managed to adapt without productivity being significantly compromised. These ways of working may need to become permanent to deal with reduced labour levels and supplemented by an increased use of technology if productivity is to be sustained.
One change that we've all become familiar with is the increased use of video conferencing and remote working. Along with digitalisation, this allows for more efficient collaboration, reducing the need for face-to-face meetings and the sharing of hard copy plans and drawings. This should complement the move to BIM and 3D design modelling, the adoption of which has been much slower than many anticipated.
Modern methods of construction – specifically off-site and modular construction – allow for a more controlled production of constituent parts of a building, unaffected by external elements or limited hours of working.
Barriers to the adoption of new technology include time and cost to implement. However, given the enforced changes of the last twelve months, and in the light of Procore's The Future of Work is Now research – which reported that 94% of construction businesses saw significant improvement in the running of projects with adoption of new technology – increased take-up of new technology seems inevitable.
Energy in the 2020s
In December 2020, the government published an Energy White Paper setting out specific steps it will take over the next decade to cut emissions from industry, transport and buildings. There will be significant opportunities for the construction industry to help meet these targets, including:
- Major projects for power generation, carbon capture storage, and hydrogen, as well as retrofitting homes for improved energy efficiency.
- A commitment to deliver 40GW of offshore wind by 2030, including 1GW of floating wind.
- Investing £1 billion in carbon capture storage in four industrial clusters by 2030.
- A delivery target of 5GW of energy from hydrogen production by 2030, backed up by a new £240m Hydrogen Fund for low carbon hydrogen production.
- Investing £1.3 billion to accelerate the rollout of charge points for electric vehicles and up to £1 billion to support the electrification of cars and mass-production of batteries.
- Exploring financing options for new nuclear, including the Regulated Asset Base funding model and specific government finance during construction.
- There is also an ambition to invest in at least one nuclear power plant by the end of this Parliament, at Sizewell C or elsewhere.
Procurement and regulation
In December 2020, the government published its Construction Playbook which has implications for procurement and opportunities for the construction industry:
Social value in procurement
A new way of public sector procurement is promised, with all major procurements from 2021 required to evaluate social value of the project, using a minimum weighting of 10% in scoring.
Bidders will be encouraged to include a fair margin of profit, recognising that contracts should be profitable, and that better risk allocation will promote a sustainable construction industry. The construction industry is encouraged to invest in digital capabilities and adopt modern methods of construction.
Green agenda
Authorities are required to outline plans for achieving net zero emissions by 2050 across its estate and put in place systems to deliver on targets. Anticipated National Procurement Policy Statements focused on economic, social and environmental outcomes will also support this change, together with a more streamlined public procurement regime.
Improving safety
Contracting authorities need to embed quality and safety in their procurement processes, ahead of cost. Apart from this change of emphasis, this will be backed up by anticipated regulatory change, such as the Building Safety Bill.
Find out more
To discuss the themes raised in this article in more detail, please contact Matthew Jones or a member of our Real Estate & Construction team.
