Does the answer to the UK’s productivity puzzle lie across the Atlantic?
The announcement in the Autumn Statement of a major boost in UK infrastructure spending has rightly set the construction industry abuzz.
But the way the Chancellor framed the policy reveals much – both about the challenges the industry faces, and how the government views them.
The Treasury’s £2.3bn injection into infrastructure was couched as more than just a stimulus. It is part of a £23bn National Productivity Investment Fund, designed to improve the UK’s weak productivity levels.
The Chancellor described British productivity as “shocking”, and official figures from the OECD show it is 30 percent below that of the USA. More damning still, a recent study by the Charted Institute of Building (CIOB) singled out construction as having the lowest productivity levels of any industrial sector in the UK
So what can we learn from the Americans? I’ve just returned to the UK after five years running Turner & Townsend’s North American business, and am struck by several key differences in the way the two markets operate.
A recent study by the Charted Institute of Building (CIOB) singled out construction as having the lowest productivity levels of any industrial sector in the UK.
Productivity and pay
Overall construction costs in the two most comparable cities, London and New York, are very similar. The latest edition of our International Construction Market Survey found that the average cost of six building types in New York was $3,650 per m2, fractionally above London’s $3,550 per m2.
Labour costs were dramatically lower in London, but so too were levels of productivity. In other words, workers in London earned less per hour but took more hours to get the job done.
By contrast the New York construction industry has higher labour costs but also higher productivity levels, with trade unions playing a part in both metrics.
While it can vary from state to state and city to city, construction in the USA tends to be highly represented by unions. This may drive up wages, but American trade unions also play an important role in promoting training among their members and working with employers to ensure a steady supply of skilled workers.
There are other reasons for New York’s higher productivity levels. Weekend working is commonplace, which, though it adds to labour costs due to premium mark-ups, reduces programme time and overheads as transport and logistics ease at the weekend.
The strong partnerships fostered between American construction firms and their workforce are well worth learning from.
Adapting the US model for the UK
For a programme manager whose primary function is to deliver better value and better outcomes for clients, writing a paean to unionisation may sound like a turkey voting for Christmas.
But leaving aside the controversial role that unions play in labour relations, the strong partnerships fostered between American construction firms and their workforce are well worth learning from.
The benefits of the USA’s collaborative dynamic could extend beyond just improved productivity for British construction. Better dialogue between employers and employees may also help address UK construction’s other chronic problem – the shortage of skilled labour.
We have long championed collaboration across the supply chain as an effective way to improve client value; and collaboration between employers and employees is no less important.
This approach might ultimately secure the UK construction industry’s ability to deliver the ambitious programme of infrastructure and house building that is needed.
The Chancellor has thrown down the gauntlet to the industry – to deliver a huge programme of work and to be more productive while doing so. The American model of strong productivity, dialogue and collaboration could be what we in the UK need to accept the challenge and run with it.
This insight article was first published in Building.