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Government weighs up Farmer Review: Modernise or Die

The government is gauging industry reaction to the hard-hitting Farmer Review published this week, with one senior ex-policy adviser saying it had achieved “broad consensus” among Whitehall departments.

Former policy adviser to now business secretary Greg Clark,  Jackie Sadek, said: “[By publishing the report, Mr Farmer] has already managed to mobilise DCLG and BEIS – both at civil servant and ministerial level. 

“He commands an awful lot of support across Whitehall and the industry so he has made a cracking start.” 

Mr Farmer was asked by the government in February via the Construction Leadership Council to identify solutions to address the industry’s structural problems, including low margins, poor productivity and a looming skills shortage. 

Within the report, titled Modernise or Die, is a controversial recommendation to tax clients that fail to innovate in the construction industry to help change construction commissioning behaviour.  

Speaking ahead on the launch, Mr Farmer described the tax as a “last resort”, should recommendations one-to-nine do nothing to change behaviour – something which he believes to be at the core of the industry’s problems. 

He said: “It’s not something that’s ideal but I felt the review would be incomplete unless you faced the really tough decisions.” 

He argued that behavioural change must be driven by clients in the way they commission construction work and made a comparison to the carrier bag tax that was implemented by the government in 2015 to reduce the volume of plastics bags customers used at major supermarkets. 

Housing minister Gavin Barwell told Construction News that he had received the report and said “the government needs some time to think about what [Mr Farmer has proposed]”.

On the proposal to tax clients, Mr Barwell said: “It’s absolutely true that the sector has got a role to play, in the same way the government has got to look at how policy can influence this and I think there’s also a big role for our education system in terms of pointing people towards this sector as place to work.”

British Land development director Nigel Webb said: “It is a complex issue, but we take a partnership approach to our projects and positively encourage innovation and the development of new skills, including the establishment of effective apprenticeship programmes. 

“We agree it is important for the construction industry to continue to improve efficiency if it is to increase capacity and remain competitive.” 

One client, who asked not to be named, said the proposal to tax clients was “really impractical” and insisted that it was a bad way to influence behaviour. 

The source agreed with elements of the report which said there needs to be a “greater understanding” between clients, contractors and the supply chain and added that this should instead be the focus for change rather than a tax. 

“The perception from the client’s point of view is ‘the contractor is double-counting and ripping us off’ and the contractor’s point of view is ‘I have to inflate my cost… because I know you’re going to negotiate me hard and push me down’ and that creates the misalignment of trust,” the source added. 

Other recommendations in the report include a complete reform of the CITB and a renewed focus on the CLC’s work streams of business models and innovation, which Mr Farmer said are good starting points for change. 

He also recommended that the government should encourage the use of pre-manufactured construction methods to boost housing in the UK, particularly with the Build to Rent sector, through policy measures. 

Laing O’Rourke chief executive Ray O’Rourke said the report “shines a light on the serious and systemic issues in UK housebuilding and we cannot afford to ignore them any longer”, while Mace CEO Mark Reynolds said “we all need to embrace this catalyst for change to attract a new breed of talent to revolutionise our industry”. 

Argent partner Richard Meier said the industry must make some “bold changes” to ensure there is sufficient capacity to deliver large scale Build to Rent across the UK and insisted that partnerships between clients and contractors would play an important role in that delivery. 

Industry minister Jesse Norman said: “This government is determined to support more housebuilding, [quicker] and in the places people want to live. 

“Given the launch of the £3bn Home Building Fund, Mark Farmer’s important review in this vital sector is very timely. 

He added: “It makes a strong case for change in the industry, identifies areas where it needs to improve, and sets out areas for action. 

“We will now carefully consider his recommendations.”

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