Specialist Group was delighted to speak to leading economist Noble Francis on how the industry will change in the coming years.
As a construction economist, Noble has perhaps had an unenviable job in recent years. He talks to us about his role as Economics Director at the Construction Products Association and gives us his predictions as to how the industry will change in the coming years.
Q. Tell us about your role with the CPA and the benefits it brings to product manufacturers.
CPA is a trade association funded by members and we exist to research on behalf of the construction products industry. We currently have 22,000 members, made up of 23 major global product manufacturers, 35 trade association members and a pyramid of trade association members. We cover three main areas: sustainability, regulations and standards within the construction sector, political engagement and the third, my team, deals with economic research.
Our 22,000 strong membership has access to our economic research, informing them of what is going to happen to the construction market and allowing them to use it as a benchmark for how they are performing as compared with their competitors. The changing industry landscape in recent years has made projections much more difficult, our main industry report used to look 5 years ahead as we had accurate pipelines for the current year plus the coming 2 years and could estimate the remainder 2 years based on that data. Now, since the impact of the Covid pandemic and the resulting supply chain issues, we are only able to look 2 years ahead and frankly, even this is a major challenge.
Q. What attracted you to the CPA, why did you decide to move into the role?
My background is very purely on the economic side of things and before I was at the CPA I spent the majority of my time doing economic models about what had happened the past 20 years and forecast forward in terms of the UK economy. I was tasked by the construction team Experian to look at forecasts of construction output and construction employment for CITB/CITB NI as part of the construction skills network. I found out very quickly how fascinating construction is and how dysfunctional it is as well, which is what makes it interesting. There aren’t any other sectors like construction where the vast majority of the activity on the ground is based around bespoke projects. The vast majority of the projects are won by major contractors or major house builders but most of the activity itself is done by smaller medium sized companies, so the business models within construction are based around sub-contracting out the risk, the cost and the activity. This is a stark contrast to many other industries and is a big factor in why I find it so intriguing and what has made me stay in this industry.
Q. The CPA is renowned for your industry forecasts and industry knowledge, what is the current forecasts for short term and long term and is there anything Manufacturers can do to protect themselves?
Manufacturers tend to already be better than contractors at planning in advance but they will have to continue to do that, planning in advance, purchasing inputs in advance and being able to hold stocks in advance is all going to be critical. In terms of labour/apprentices, there are two elements there. On the contractor side, I think there is the perception that there is an image problem that can be solved by flashy websites with nice imagery, but the problem is deeper than this. The reality is that once every 10 years the economy will suffer a recession and construction will always fair out worst from economic downturns and firms don’t help themselves by only skilling workers in one particular trade and not giving them the scope to develop other skill areas and/or facilitate growth into other skill areas.
However, I still think a lot of emphasis is placed on the university route and leading to jobs where you’ll be office based and working on presentations etc. when this is not the ideal route for a lot of people. The whole attraction of construction for me is that whatever you want to do in the country you need construction to have been there first – including the schools and universities people study in, the hospitals we are treated in, the roads we drive on, even the broadband infrastructure to allow the new working from home culture – it all exists because of the construction industry. It’s important for young people to see that university does not necessarily equate to success.
Q. Do we have hope in the horizon?
The one thing to say is that construction demand remains strong, there are lots of issues on the supply side, but this is not 2008 and it’s not 1989. We forget because it feels like it has been so long, how devastating the 1989 recession was and particularly the financial crisis in 2008. In England private housing between 2007 Q1 and 2009 Q1 fell 74%, and yet at the moment housing demand remains strong. Commercial activity is still 27% lower than it was pre Covid because commercial tenants building in new commercial towers is very subdued at the moment. However, what is very active is the fit out market in the broader sense – major refurb of commercial developments, changing office spaces for example those wanting to downsize into smaller, better quality offices.
In the long term, there are lots of opportunities in the fit out market and even outside of commercial, generally there is going to have to be a lot of activity in turning our buildings more towards repurposing, reusing, reutilising and recycling, rather than just building something new. Despite short term disruption, there is an immense amount of growth to look forward to.
Read the full interview here: Predicting the Unpredictable with Noble Francis