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Ray O'Rourke and Vince Cable talk to Construction News

Business secretary Vince Cable visited Delancey’s Elephant Road site, where Laing O’Rourke is main contractor, alongside chairman Ray O’Rourke to see how the contractor is using advance manufacturing and BIM. Construction News caught up with them afterwards.

It’s a grey day in London’s Elephant & Castle and business secretary Vince Cable and Ray O’Rourke are touring Delancey’s Elephant Road site where Laing O’Rourke is building three new residential towers, restaurants, retail units and leisure facilities.

A Laing O’Rourke consortium has been awarded a £22m grant to further advance offsite manufacturing techniques and training.

Construction News caught up with the pair to discuss the state of the industry.

Construction News: [To Dr Cable] Tell me about what you’ve seen today.

Vince Cable: I’ve seen a massively impressive, innovative way of building houses.

The context is we’re building half the number of houses we should be; we have to crank up the numbers.

Traditionally we have thought this is mainly a planning issue, but actually this revolution happening in industry could halve the [time taken to build houses] and cut costs by up to a third through two things.

Firstly, through BIM technology, which is being developed rapidly in the UK and becoming a requirement for central government procurement next year, but [Laing O’Rourke] are pioneering and developing it.

Second is through offsite manufacturing – turning [construction] into a manufacturing process, a different kind of business model altogether.

We have this grant for Laing O’Rourke and its supply chain partners and that’s for developing the technology, manufacturing the products and training all in the same package.

This [project is] these ideas in practice.

CN: In your time in government, how far has the construction industry developed compared with other industries such as manufacturing and automotive.

VC: I think it’s less developed [than those industries].

But what we have done is when we established the industrial strategy, we didn’t just do wings and wheels and the usual suspects.

“They realised that the UK industry was less advanced in technology than some other evolving European countries; we had a lot of ground to make up”

Vince Cable

We had a strategy for construction, which Sir David Higgins chairs with me, and it’s basically looking from scratch at the weaknesses of the industry.

When they started turning the mirror on themselves, they realised that, by and large, the UK industry was less advanced in technology than some other evolving European countries; we had a lot of ground to make up.

The level of skills in the industry was inadequate.

The traditional pattern was of the main contractors who didn’t do training and relied on subcontractors, who have had financial problems.

That work has produced a 10-year strategy, which is a potentially massive transformation for the industry in terms of cost and time saving with these technologies implanted.

“I think people will follow what’s going on here in the space of the next two or three years”

Ray O’Rourke

Laing O’Rourke is leading the way on a lot of these things, but it’s important it isn’t just one or two pioneering companies; [it’s important that] it becomes industry standard.

If we can do that, a lot is possible.

Ray O’Rourke: I echo what Dr Cable has said.

The government has challenged us and this is the first big step towards that.

I think people will follow what’s going on here in the space of the next two or three years.

We will then be an attractive industry to engage with for a lot of young people, who today are probably not minded to come to our industry – both male and female.

There is a huge opportunity for change. In the 2025 strategy we’re being asked to improve productivity by 50 per cent.

“We have got 70,000 additional apprenticeships in construction trades but it’s nothing like enough”

Vince Cable

That in itself is going to be a massive incentive to manufacture, to use digital engineering – broadly referred to as BIM.

Then on some of the big projects we have, not just in housing but in [for example] nuclear where you have concerns about the time you take to construct, I think we’ll be able to do what we have done on the Olympics and deliver them faster and ahead of schedule.

And then, in the sense of nuclear plc, we’ll be an attractive proposition globally.

CN: But what you’re doing here is a competitive advantage for you; how much are you going to share your learning with the industry?

ROR: We are completely open; we are not at all guarded about what we’re doing.

“What keeps our competitive juices going is that we’ll have to move to the next iteration to stay ahead”

Ray O’Rourke

We don’t think it’s particularly special; we think it’s the way it should be.

What keeps our competitive juices going is that we’ll have to move to the next iteration to stay ahead.

CN: But you have significantly invested in this. It’s not something that can happen overnight for, say, a volume housebuilder, is it?

ROR: I think part of that is the fact we’re a private company with some scale.

Publicly quoted companies are continually having to deal with headline and bottom line numbers.

We’re a private organisation, we directly employ and train our people and it’s a different proposition. We take a longer-term view.

CN: The skills issue is a huge concern. How much of that is this industry’s responsibility and how has government played its part in getting people into the industry and helping the private sector?

VC: It’s got to come from both sides. We have got 70,000 additional apprenticeships in construction trades but it’s nothing like enough.

It’s partly about doing more, but partly changing the nature of the industry.

The apprentice we met today was a prototype of the type of person you [would hope to] see in the industry, who is [doing] less heavy manual work, is someone who has more advanced Level 4 foundation degree qualifications, basically assembling things made in a factory, so it’s a different building trade to what we are used to seeing.

“The idea that you can hire people in a boom and lay them off in a slump is how a lot of their highly qualified people have drifted off and become taxi drivers”

Vince Cable

Historically the problem has been that big housebuilders haven’t done much training.

They relied on small builders who have been badly squeezed by the last five years and it just hasn’t happened, so…

CN: …But have you spoken with these housebuilders?

VC: They have accepted that. One of the good things from the Construction Leadership Council is the acceptance that they have to invest against the cycle.

The idea that you can hire people in a boom and lay them off in a slump is how a lot of their highly qualified people have drifted off and become taxi drivers, which is not helpful.

I think there is a general buy-in in the industry that we need a different way of doing things.

CN: An area you have been outspoken on is payment and supply chain issues. With two months to go until the general election, how do you feel that has progressed?

VC: It is a clearly unsatisfactory situation.

The building industry is just one part of a bigger problem, though. It’s worse among retail suppliers.

We have legislation going through where companies will have to declare their payment terms so it’s transparent.

The government has a reasonably good record.

My department has to clear its invoices in five working days, and government more generally in 30 days. We’re extending that to the rest of the public sector.

There is a code of conduct being developed for late payment, which we’re encouraging responsible companies to sign up to…

CN: …When you say ‘encouraging’, what do you mean?

VC: Well we could compel… we’re not compelling companies, we think it’s much better that companies accept the standards…

CN: …Why do you think it’s better, though – doesn’t it mean companies won’t sign up?

VC: The problem with compelling them is that sometimes you get a big company which can’t pay, rather than won’t pay.

It’s not that they’re hoarding liquidity, just that they’re in trouble themselves so they delay payment.

“What we have done is taken the view that a combination of transparency and a tougher code is what will suffice for the time being”

Vince Cable

So punishing the company through legal sanctions is problematic.

You probably know of cases in the steel industry where companies would have gone under if they hadn’t extended their payment terms.

There are no countries in Europe apart from Sweden that invokes legal penalties for late payment…

CN: …But you told us you were looking at the Swedish model very closely.

VC: Yes, but what we have done is taken the view that a combination of transparency and a tougher code is what will suffice for the time being.

CN: Today’s announcement may make for a more sophisticated industry, but it doesn’t solve the issue of supply and demand, does it?

VC: It’s part of a much bigger picture.

Nobody sensibly believes there is a silver bullet, but it’s very striking as a country that we don’t seem to be able to get above 150,000 homes, even with the industry working almost flat out, whereas in the late 60s and 70s we were doing 400,000 a year.

“It’s about improving access to finance, so business doesn’t depend on the same gang of banks”

Vince Cable

In the interwar period we suddenly went from [building] 100,000 to 300,000 homes; we can’t do that today.

It’s partly planning, access to credit, land issues, councils who should be doing work on commissioning housing but can’t get borrowing powers.

Get all those elements together and you’ll get better levels of housebuilding.

CN: Are you proud of the record of this government and what you’ve been doing in power?

VC: Yes. We started in a very bad situation.

It wasn’t just a recession, the banks had gone bust and that hadn’t happened since the middle of the 19th century. It was dire.

But there are a lot of things we have done, certainly in my department: trying to create a 10, 20-year horizon for key industries; trying to get apprenticeships moving, which we’ve done on a big scale; innovation, which we’ve done through the Catapult network, and you’ve seen a very good example of this [at the Laing O’Rourke project].

“I have never seen such a pipeline of opportunity on the horizon which probably stretches out for 20 years, and I’ve been in the industry nearly 40”

Ray O’Rourke

It’s also about improving access to finance, so business doesn’t depend on the same gang of banks, by opening it up through the British Business Bank, internet-based funding, challenger banks. 

There are a lot of things are happening through the initiatives we have taken, in my department particularly.

CN: Ray, is the industry in a better position than it was five years ago?

ROR: I have never seen our industry in such good shape.

I have never seen such a pipeline of opportunity on the horizon which probably stretches out for 20 years, and I’ve been in the industry nearly 40 years.

I echo what Dr Cable said: I think there’s been a lot of good work done. It’s a great time for us, for the industry.

And what we’re doing at Laing O’Rourke is an enabler for the industry to step up – and I think it will.

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