Details of the Construction Sector Deal revealed

Foreword

Construction underpins our economy and society. Few sectors have such an impact on communities across the UK or have the same potential to provide large numbers of high-skilled, well-paid jobs.

The construction sector reaches every corner of the United Kingdom and touches each of our lives. It is fundamental to our economy as we invest in our future: building the homes we live in, the schools and hospitals we rely on, and the offices, factories, and transport and energy infrastructure that keep the wheels of industry turning.

We are in the early days of one of the greatest construction programmes in our history, from delivering more homes that people can afford, in the places they want to live, to major infrastructure projects such Crossrail and the third runway at Heathrow. This infrastructure pipeline represents more than '600 billion over the next decade, including at least '44 billion for housing. The pace of this change, and the size of this opportunity, demands a construction sector that is the best in the world.

At the same time, the UK is at the forefront of one of the greatest industrial opportunities of our time: the move to cleaner economic growth.

Through the Clean Growth Grand Challenge, the government has set out its determination to maximise the advantages for UK industry from this global shift, including the mission to halve the energy use of new buildings by 2030.

Today, we are setting out our vision for a construction sector that more than meets these challenges: a sector that can build new homes in weeks ' and even days ' rather than months; that can deliver new buildings at a third of the cost; that can provide affordable, energy efficient homes.

A transformed sector does not only mean an industry that is more productive, more highly skilled and ready to grasp the opportunities of the global infrastructure market. It means benefits across every sector and every community:

• better homes that are cheaper to run
• smarter and safer buildings
• lower emissions and cleaner air

The Construction Leadership Council has already drawn together the wider sector ' the construction professions, contractors and product suppliers ' to set out a vision for the future and a plan to address its challenges.

A continued commitment to partnership across the construction sector, local and national government, universities and research institutes, and with businesses and organisations throughout society, will be pivotal to our success.

This Sector Deal will drive economic growth, create well-paid, highly-skilled jobs in every part of the UK and improve lives across the country. It represents a shared commitment to achieve these goals by establishing a strategic partnership between the government and the sector that we will seek to strengthen in the years ahead.

Rt Hon Greg Clark MP'
Secretary of State for Business, Energy and Industrial Strategy

Andrew Wolstenholme'OBE'
Co-Chair, Construction Leadership Council

Industrial Strategy at a glance

We will create an economy that boosts productivity and earning power throughout the UK.

5'foundations of productivity

The Industrial Strategy is built on 5 foundations:

• Ideas - the world's most innovative economy
• People - good jobs and greater earning power for all
• Infrastructure - a major upgrade to the UK's infrastructure
• Business environment - the best place to start and grow a business
• Places - prosperous communities across the UK

Grand Challenges

We will set'Grand Challenges'to put the United Kingdom at the forefront of the industries of the future:

• AI'and Data Economy - We will put the UK at the forefront of the artificial intelligence and data revolution
• Future of Mobility - We will become a world leader in the way people, goods and services move
• Clean Growth - We will maximise the advantages for UK industry from the global shift to clean growth
• Ageing Society - We will harness the power of innovation to help meet the needs of an ageing society

Key policies

Key policies include:

Ideas

• Raise total research and development (R&D) investment to 2.4% of'GDP'by 2027
• Increase the rate of'R&D'tax credit to 12%
• Invest '725 million in new Industrial Strategy Challenge Fund programmes to capture the value of innovation

People

• Establish a technical education system that rivals the best in the world to stand alongside our world-class higher education system
• Invest an additional '406 million in maths, digital and technical education, helping to address the shortage of science, technology, engineering and maths (STEM) skills
• Create a new National Retraining Scheme that supports people to re-skill, beginning with a '64 million investment for digital and construction training

Infrastructure

• Increase the National Productivity Investment Fund to '31 billion, supporting investments in transport, housing and digital infrastructure
• Support electric vehicles through '400 million charging infrastructure investment and an extra '100 million to extend the plug-in car grant
• Boost our digital infrastructure with over '1 billion of public investment, including '176 million for 5G and '200 million for local areas to encourage roll out of full-fibre networks

Business environment

• Launch and roll out Sector Deals ' partnerships between government and industry aiming to increase sector productivity. The first Sector Deals are in life sciences, construction, artificial intelligence and the automotive sector
• Drive over '20 billion of investment in innovative and high potential businesses, including through establishing a new '2.5 billion investment programme, incubated in the British Business Bank
• Launch a review of the actions that could be most effective in improving the productivity and growth of small and medium-sized businesses, including how to address what has been called the 'long tail' of lower productivity firms

Places

• Agree Local Industrial Strategies that build on local strengths and deliver on economic opportunities
• Create a new Transforming Cities fund that will provide '1.7 billion for intra-city transport. This will fund projects that drive productivity by improving connections within city regions
• Provide '42 million to pilot a Teacher Development Premium. This will test the impact of a '1,000 budget for high-quality professional development for teachers working in areas that have fallen behind

An independent Industrial Strategy Council will assess our progress and make recommendations to government.

Executive summary

The Construction Sector Deal sets out an ambitious partnership between the industry and the government that aims to transform the sector's productivity through innovative technologies and a more highly skilled workforce.

The life of every person in Britain is affected by the construction sector. It is one of our truly nationwide industries ' encompassing individual homes in remote areas and some of the greatest infrastructure projects of our generation, in every corner of the United Kingdom. It is one of our major employers, with around 3.1 million people working in the sector, most of whom are outside London and the South East.

The construction sector has an important role to play in achieving the vision set out in our Industrial Strategy: strengthening the foundations of our economy and achieving the Grand Challenges:

• putting the UK at the forefront of the'AI'and data revolution
• maximising the advantages from the global shift to clean growth
• becoming a world leader in the future of mobility; and
• meeting the needs of an ageing society

The construction sector, encompassing contracting, product manufacturing and professional services, had a turnover of around '370 billion in 2016, adding '138 billion in value to the UK economy ' 9% of the total ' and exported over '8 billion of products and services.

However, the potential of the sector has been held back by productivity that is historically below than the wider economy ' an average of 21% lower since 1997.

The Farmer Review, published in 2016, highlighted a combination of factors behind this problem, including the cyclical nature of the sector, the unpredictability of future work and a lack of collaboration across the sector. It concluded that transforming the industry would require shared leadership by the industry, its clients and the government.

This Sector Deal meets that goal, bringing together a coalition of businesses from across the sector, its clients, the government and research institutions to set out a strategy to improve the industry's performance and help it fulfil its potential to deliver wide-reaching social benefits.

We are setting out an ambition for the construction sector to deliver:

• better-performing buildings that are built more quickly and at lower cost;
• lower energy use and cheaper bills from homes and workplaces;
• better jobs, including an increase to 25,000 apprenticeships a year by 2020;
• better value for taxpayers and investors from the '600 billion infrastructure and construction pipeline
• a globally-competitive sector that exports more, targeting the $2.5 trillion global infrastructure market

The Sector Deal builds on Construction 2025, published by the government and the Construction Leadership Council (CLC) in 2013, and provides the framework for a sector that delivers:

• a 33% reduction in the cost of construction and the whole life cost of assets
• a 50% reduction in the time taken from inception to completion of new build
• a 50% reduction in greenhouse gas emissions in the built environment 'supporting the Industrial Strategy's Clean Growth Grand Challenge
• a 50% reduction in thetrade gap between total exports and total imports of construction products and materials

These goals will be met by focusing on 3 strategic areas:

• Digital techniques deployed at all phases of design will deliver better, more certain results during the construction and operation of buildings. Clients, design teams, construction teams and the supply chain working more closely together will improve safety, quality and productivity during construction, optimise performance during the life of the building and better our ability to upgrade and ultimately dismantle and recycle buildings.
• Offsite manufacturing technologies will help to minimise the wastage, inefficiencies and delays that affect onsite construction, and enable production to happen in parallel with site preparation ' speeding up construction and reducing disruption.
• Whole life asset performance will shift focus from the costs of construction to the costs of a building across its life cycle, particularly its use of energy. The government will ensure that our modern Industrial Strategy and our significant investments in housing and infrastructure support this change and innovation.

As part of the Clean Growth Grand Challenge, the Prime Minister has announced a mission to at least halve the energy use of new buildings by 2030 through developing innovative energy and low carbon technologies driving lower cost, and high-quality construction techniques. This will also reduce the cost of retrofitting existing buildings to make them more efficient and more sustainable.

And this commitment to innovation and improvement will help the industry respond to the recommendations of the Independent Review of Building Regulations and Fire Safety, published in May 2018, which challenged the sector to apply the lessons learned from its successful work in order to improve the sector's health and safety culture to deliver high-quality, safe buildings.

Industrial Strategy foundations

A key ambition for the Industrial Strategy is to establish long-term partnerships between industry and the government that aim to transform productivity and boost earning power in sectors across the UK.

This Sector Deal reinforces the 5 foundations of the Industrial Strategy:

• ideas
• people
• infrastructure
• business environment
• places

Ideas

The government committed in the Industrial Strategy white paper to increase investment in research and development (R&D) to 2.4 per cent of'GDP'by 2027. The Construction Sector Deal sets out how the construction industry will contribute to this, with a '420 million joint investment from the sector and the government in new technology and techniques. This will build on existing initiatives such as the Centre for Digital Built Britain; the technology roadmap developed by the Infrastructure Industry Innovation Platform (i3P) consortium; and work with construction clients to drive demand for innovative construction materials, technologies and techniques.

People

The government set out its vision to create good jobs and greater earning power for all in the Industrial Strategy. The construction sector employs nearly one in 10 working people in the UK, giving it unparalleled potential to improve skill levels right across the country. This deal sets out how the industry will attract, train and retain a more skilled workforce, and how it will meet the demographic challenge of a workforce where nearly a third of workers are aged over 50.

This includes working with the Construction Industry Training Board (CITB) to ensure a strategic focus on future skills needs, and toincrease significantly the number of approved apprenticeship standards. The sector will also aspire to increase the number of apprenticeship starts to 25,000 a year by 2020, and work with professional institutions and the higher and further education sectors to ensure that all those training for or working within the industry are able to develop and increase their skills.

Infrastructure

The government is delivering a major upgrade to the UK's infrastructure. To provide greater certainty of demand for the sector, the Infrastructure and Projects Authority publishes the National Infrastructure and Construction Pipeline, with current projections of around '600 billion of public and private investment in infrastructure over the next 10 years ' a doubling of economic infrastructure in the decade to 2022 to 2023. This is backed by a commitment to modernise the way major projects are delivered, which will ensure this Sector Deal will help the sector to deliver both high-performing infrastructure and growth in the construction sector.

Housing is the cornerstone of our infrastructure, which is why the government is supporting communities with ambitious, innovative plans to deliver 1.5 million more homes by 2022, backed by least '44 billion of financial support ' providing the homes that people so urgently need and giving certainty to the construction sector about future demand.

Business environment

To ensure the construction sector is home to more sustainable, profitable businesses, the standard business model needs to change to one that is based on strong, integrated supply chains and higher levels of collaboration. This will be based on four principles:

• a standard approach to how built assets are procured, based on whole life asset value and digital designs, with benchmarks that will allow performance to be measured clearly;
• a new, fairer approach to contract and payment practices to ensure'SMEs'are not unfairly disadvantaged, reducing risk to'SMEs'and supporting collaborative supply chains;
• a boost in the sector's exporting capability, driven by our new investments in digital and manufacturing technologies to get the most of a market that is estimated to be worth '49 trillion between now and 2030; and
• better access to the capital the industry needs to invest and grow, including taking account of existing funding streams and the conclusions of the Patient Capital Review, which aims to increase availability of longterm finance for innovative firms.

Places

The construction sector operates across the country and employs significant numbers of highly skilled workers in all nations and regions of the UK, in jobs as diverse as minerals extraction, construction contracting, products manufacturing and professional services. Around 80% of construction products used by the sector are produced or manufactured in the UK.

The Sector Deal will embed these supply chains in the UK, ensuring they can support a construction sector that is increasingly based on digital and manufacturing technologies. And with a technology-driven business model, fewer jobs will need to be concentrated on construction sites and can instead by created across the UK, meaning that investments in infrastructure or housing will create greater economic benefits across the UK, as well as the places in which they are located.

Key commitmentsIdeas

To be the world's most innovative economy.

To increase the capacity of the sector to innovate ' accelerating the development and commercialisation of digital and manufacturing technologies to create infrastructure that is higher performing and built more safely.

Sector action to support construction

Invest '250 million directly aligned with the Industrial Strategy Challenge Fund Transforming Construction: Manufacturing Better Buildings programme:

• The Infrastructure Industry Innovation Platform (i3P) will align strategic'R&Dinvestment by the consortium with the Industrial Strategy Challenge Fund Transforming Construction programme, to accelerate change in the infrastructure and construction sector. Currently Infrastructure Industry Innovation Platform (i3P) members invest more than '150 million per annum in'R&D.

Develop digital building designs for use in procurement for all projects:

• Continue the development within the product and manufacturing sector of tools to allow accurate, repeatable, machine-readable product information to be used across the sector. Industry funded and led initiatives such as digital object indicators as well as LEXiCON from the Construction Products Association can significantly increase construction speed and confidence in product performance and overall building safety, supporting productivity improvements.

Support the commercialisation of new construction technologies and techniques:

• Support the adoption of new construction technologies and techniques developed through the Transforming Construction programme.
• Consider with the government how to increase the capability of the Infrastructure Industry Innovation Platform (i3P) consortium so that it can fully support innovation and best practice in the construction sector.
• Develop a common metrics methodology for the capture and analysis of data on the use of smart construction in the housing sector ' starting with a data dashboard and a series of case studies in spring 2018.

Government action to support construction

Invest '170 million from the Industrial Strategy Challenge Fund (ISCF) in the Transforming Construction: Manufacturing Better Buildings programme, providing funding for:

• Digital technologies, including Building Information Modelling (BIM), sensors, data analytics and smart systems technologies and the Information Management Landscape (IML); which will increase the efficiency of construction techniques.
• Manufacturing technologies and production systems, which will develop new digital building designs for built assets and new manufacturing technologies that will enable the delivery of these.
• Energy generation and storage technologies for buildings, reducing running costs for building users.
• Research and development (R&D) and demonstration programmes, which will support innovations using digital and manufacturing technologies across the infrastructure, social infrastructure, commercial construction and homebuilding sectors.

Develop digital building designs for use in procurement for infrastructure projects:

• The Education & Skills Funding Agency (ESFA) to work to develop a product platform for new school buildings, and to use this platform to procure suitable projects.
• The government will work with housing clients, developers and their supply chains, to ensure that the Industrial Strategy Challenge Fund supports the development and commercialisation of technologies and digital building designs that can help deliver the government's 2015 commitment to deliver a million homes by the end of 2020 and half a million more by the end of 2022.
• Consider with the sector how to increase the capability of the Infrastructure Industry Innovation Platform (i3P) consortium so that it can fully support innovation in the construction sector.

People

To generate good jobs and greater earning power for all.

To make sure that high quality construction training is available and is taken up, so that the sector can attract, retain and develop workers with the skills it needs now and in the future.

Sector action to support construction

Reform the Construction Industry Training Board (CITB) so that it is more strategic and focussed on future skills needs:

• Support the implementation of the'CITB'reform plan, by strengthening links with the'CITB, providing greater strategic direction, leadership and accountability to enable it to identify current and future skills needs, training and progression routes, set standards, fund construction training and promote the industry.

Attract, retain and develop the people and skills that the industry needs:

• Set the industry aspiration to increase the number of construction sector apprenticeships to 25,000 a year by 2020.
• Co-ordinate the development of new apprenticeship standards across the sector, and to work with the'IfA'to ensure these are developed to the required standard, approved and implemented as quickly as possible, with 50 new apprenticeship standards agreed by December 2018.
• Work with the'CITB,'IfA'and key trade associations to ensure the sector has access to accurate information about new apprenticeship standards and the Apprenticeship Levy, and models for supporting apprentices in small employers, enabling it to use levy funding to support the development of construction skills across the supply chain.
• Develop a single industry platform and portal to support construction careers based on GoConstruct and building on the 'Inspiring Construction' joint campaign between Build UK and the'CITB'that promotes careers in construction to the next generation.
• Work to increase diversity of the sector, with regard to gender, ethnicity and disability, and to actively promote construction careers across society.

Sector action to support construction

• Work with the government and providers to develop structured career pathways into and within the sector, including high quality industry placements for students in schools, further and higher education. This includes testing and trialling industry placements in the academic years leading up to 2020, and ensuring placements are available for up to 1,000 students taking Construction T levels from September 2020, with the aim of increasing placements to meet demand in future years, and working with the'CITB'to develop solutions to the challenges to implementing industry placements in the construction sector.
• Develop common training standards and programmes in key areas such as Health & Safety and management, to continue to improve standards in the UK construction sector.
• Improve competences for those working on the design, construction and operation of higher risk residential buildings, taking forward key recommendations from the final report of the Independent Review of Building Regulations and Fire Safety. The Industry Response Group Steering Group on Competences for Building a Safer Future will set out a plan for an overarching body to provide oversight of competence requirements and support the delivery of competent people.
• Develop programmes to retrain the workforce with the skills to support the future industry needs to embed and maximise the use of digital technologies and modern methods of construction.
• Develop programmes to engage and retain the current workforce.

Government action to support construction

Reform the Construction Industry Training Board (CITB) so that it is more strategic and focussed on future skills needs:

• Implement fully the commitments made in the'CITB'Review, including working with the industry to deliver planned reforms.

Attract, retain and develop the people and skills that the industry needs:

• Invest '34 million to scale up innovative training models across the country ' to support the delivery of 1.5 million new homes by 2022.
• Work with the Confederation of British Industry (CBI) and Trades Union Congress (TUC) to establish a National Retraining Partnership, which will target skills shortages in the construction sector as a priority.
• Work with the sector and the Institute for Apprenticeships (IfA) to develop new apprenticeship standards, to enable the industry to make effective use of its Apprenticeship Levy contributions.
• Work with industry to build capacity and prepare for the implementation of new Construction T levels by supporting the construction sector to test and trial industry placements within existing vocational qualifications before 2020 and to offer high quality construction industry placements within the first T levels from September 2020.

Make effective use of public procurement to encourage skills development in construction supply chains:

• Continue to use public sector procurement to drive investment in the skills needed to support modernisation and industry-led innovation.

Infrastructure

A major upgrade to the UK's Infrastructure.

To ensure the construction sector can support the government's ambition to deliver a major upgrade to the UK's infrastructure.

Sector action to support construction

• Take forward the private sector investment set out in the National Infrastructure and Construction Pipeline, contributing to the delivery of more than '460 billion of planned infrastructure investment. This will include contributing to over '50 billion of investment in the energy sector, '47 billion of investment in utilities, and over '10 billion of investment in digital infrastructure to 2020 to 2021.
• Use the Infrastructure Client Group (ICG) to share and embed best practice across the sector.
• Collaborate with Kings College London to create model forms of procurement to enable sustainable business models to be developed, to encourage increased adoption and standardisation of innovations across the housing sector.

Government action to support construction

• Take forward the public sector investment set out in the National Infrastructure and Construction Pipeline, contributing to the delivery of more than '460 billion of planned infrastructure investment. This will include contributing to over '70 billion in transport infrastructure, and over '43 billion in social infrastructure such as schools, housing and healthcare to 2020 to 2021.
• Establish a new team within the Infrastructure and Projects Authority (IPA) to define cost and performance benchmarks.
• Use digital technology and innovation to improve the way we deliver and extract maximum whole life value from infrastructure by supporting effective delivery of the Digital Build Britain programme.
• Use the presumption in favour of offsite construction by 2019 across suitable capital programmes, where it represents best value for money.
• Promote long-term, collaborative relationships with industry to reduce transaction costs in procurement and maximise innovation.

Places

To have prosperous communities throughout the United Kingdom.

To use the adoption of digital technologies and the move to offsite manufacturing to strengthen local supply chains across the UK.

Sector action to support construction

• Work with the government to strengthen the supply chain for mineral and construction products across the whole of the UK.

Government action to support construction

• Work with the wider construction sector, to strengthen the supply chain for mineral and construction products across the whole of the UK.
• Ensure high quality training is available in all nations and regions of the UK.

Business environment

To be the best place to start and grow a business.

To improve the lifetime performance of buildings, through better procurement and a more sustainable business model in construction ' and to establish the UK as a global leader by increasing expo...