Above ground, homebuilders are facing an economic spring – with a healthy pipeline and sales receipts performing well.
But below ground, the roots of our subcontractors and suppliers are still frozen out in the cold; the upturn in the industry over the past few months needs to be matched by subcontractors gearing up to meet demand.
The real question is whether our subcontractors and suppliers can gear up to meet demand while ensuring quality. If not, where does that leave the construction industry? How will we meet demand, and where will our products come from?
Half a decade of underinvestment in skills and technologies sits alongside a supply chain that was brought to its knees after the construction tap was turned off in 2008.
No on switch
And it’s not a case of turning the tap back on. Suppliers who mothballed production in 2008 need certainty in long-term demand, combined with healthy margins to make an entry back into the market worth their while, and a dire lack of investment in construction skills training leaves a shortage of competent labour.
“Challenge and change is good for innovation. But equally, innovation can have a lag time for quality”
Many construction products suppliers won’t get out of bed now for less than a 10 per cent increase on their 2008 base price. And those who have are providing an insufficient trickle, with a reduced commitment and increased delivery leads.
So who controls the tap? If it’s to be retained by the homebuilder, we need to see a reworking of the relationship between contractor and subcontractor/supplier.
To continue to deliver, we could increase the attractiveness of our order to suppliers to well above 2008 prices. This means taking an inevitable and significant blow to our own margins, building fewer homes and ultimately a slower rate of recovery.
Or is this the stimulus needed to take offsite manufacture seriously? We can look at other means of production: sourcing cheaper materials from abroad, or blending onsite construction with cheaper offsite modular components.
Challenge and change is good for innovation. Modular components, for example, perform well from an ecological, development and price point of view.
But equally, innovation can have a lag time for quality. Teething problems with the design details, the understanding of labour and interface of offsite modules risks adding in complications to the construction process – adding costs and reducing margins.
As homebuilders we need to gear up for change, either seeking innovative new products or preparing to take a hit to bring production facilities out of hibernation.
In the long term innovation usually triumphs, but it takes deep pockets and a guaranteed workload to sustain investment.
Stuart Miller is managing director of Quadrant Construction