UK growth plan misses the real construction prize
By Callum White - The author is a PhD researcher at the University of Cambridge, specialising in the digital transformation of construction and concrete testing. The author shares thoughts on the recent Spring Statement, which outlined the UK government's plans for economic growth, including aspects of construction and planning reform.
Over the past two decades, construction productivity has increased by just 0.4% annually [1]. This marginal increase has taken place amid a technological revolution that has transformed virtually every other sector of the UK economy. While financial services adopted algorithmic trading and manufacturing embraced robotics, construction has remained obstinately analogue. Despite this broader context, the Spring Statement focused on supply-side constraints related to land availability and value [2, 3]:
“The boost to GDP is driven by higher productivity in the construction sector, from bringing land on the edges of our largest towns and cities into more productive use, lower planning costs and removing artificial constraints imposed by planning that prevent the construction sector from expanding.”
“A 0.14 per cent increase in economy wide GDP could result from an increase in the construction sector’s ability to produce houses. Around half of the value of a house reflects the value of land rather the construction costs of building a house on it. Green belt land release and planning permission should enable labour and capital to be put to more productive use on land released for development than if these factors were employed elsewhere in the economy and the land left undeveloped.”
By overlooking the profound inefficiencies in current construction processes, policymakers miss one of the economy's most significant opportunities. The construction sector's productivity crisis stems not only from planning constraints but from deep-seated structural inefficiencies that have persisted for decades. The sector faces three interconnected crises: an unprecedented skills shortage, systemic fragmentation that prevents collaboration, and material use inefficiencies that would be considered scandalous in any other industry.
Skills shortages represent a critical constraint on productivity growth. The Construction Industry Training Board forecasts indicate that the sector will need 225,000 additional workers by 2027 to meet demand [4]. Construction vacancies remain 30 per cent above pre-pandemic levels, with particular shortages in digital and technical specialities [5]. Filling these gaps is not merely a question of quantity but of capability. The construction workforce has limited exposure to the digital tools and modern methods that define best practice in parallel sectors. The result is an industry trapped in a vicious cycle: productivity remains low because workers lack the modern skills necessary for success. In contrast, upskilling investment remains limited due to compressed margins caused by inefficiency.
The construction sector's structure further impedes productivity growth. The seminal Farmer Review, "Modernise or Die," identified fragmentation and adversarial contracting as fundamental barriers to improvement. Unlike manufacturing industries that have consolidated around integrated supply chains and collaborative partnerships, construction remains dominated by complex webs of subcontractors operating under contracts that incentivise cost-shifting rather than value creation. Case studies of integrated project delivery approaches demonstrate productivity increases of 15-20 per cent through aligned incentives and collaborative delivery models [6]. Most damning is the scale of waste embedded in current construction processes. On many projects, 20-30 per cent of construction costs are attributed to inefficiencies, errors, and rework [7].
Several solutions to these challenges have been proposed, but a new construction paradigm has yet to be delivered. Modern Methods of Construction can reduce on-site labour requirements by up to 60 per cent and project delivery times by 30-50 per cent, but account for only 8 per cent of UK housing output, compared to 15 per cent in Germany and 20 per cent in Japan [8]. The economic logic is compelling. Factory-based construction benefits from economies of scale, standardised processes, and controlled environments that eliminate many of the variables that drive cost overruns and delays in traditional construction. Components can be manufactured during site preparation, thereby reducing overall project timelines. Meanwhile, advanced quality control systems can identify and correct defects before installation, rather than during expensive post-completion rectification.
Digital transformation represents another untapped resource. Full-scale digitisation could reduce project costs by circa 5 per cent [9]. Advanced digital tools, from parametric design software to real-time project monitoring systems, offer the potential to eliminate many of the coordination failures and information asymmetries that drive waste in traditional construction processes. Machine learning algorithms can optimise material usage based on available material supplies, predictive analytics can identify potential delays before they occur, and automated quality control systems can detect defects in real-time rather than during final inspections.
Skills development must move beyond traditional apprenticeships to encompass the digital capabilities that define modern construction. This involves not only training new entrants but also thoroughly upskilling the existing workforce. The scale of this challenge requires coordination among government, industry, and educational institutions to develop curricula that reflect current and emerging needs rather than historical precedents.
An integrated strategy encompassing skills development, digital transformation, and regulatory reform must be implemented to accelerate the adoption of modern construction methods. Transforming construction would position the UK as a global leader, with British expertise in digital construction methods becoming a significant export opportunity. The potential economic returns from comprehensive construction reform dwarf the modest gains projected from land release alone.
Sources
[1] Office for National Statistics (2023). UK Productivity by Sector, 2000-2022, Newport.
[2] Office for Budget Responsibility (2025). Economic and Fiscal Outlook – Spring 2025, London.
[3] HM Treasury (2025). March 2025 Press release: OBR concludes planning reforms will bring housebuilding to its highest level in 40 years.
[4] CITB (2023). Construction Skills Network Report 2023, London.
[5] Gleeds (2024). UK Construction Market Report 2024, London.
[6] Construction Innovation Hub (2023). Value in Integrated Project Delivery: Benchmarking Report, Cambridge.
[7] Construction Leadership Council (2020). Roadmap to Recovery: Productivity in Construction, London.
[8] McKinsey Global Institute (2022). Reinventing Construction: A Route to Higher Productivity, New York: McKinsey & Company.
[9] Cabinet Office (2021). Government Construction Strategy 2021-2025: Annual Report, London: HM Government.