Tech disruption of construction industry offers challenges and opportunities

Artificial intelligence could revolutionise industry – but checks and balances remain vital.

Byline: Stephen Emerson, Managing Editor.

Artificial Intelligence (AI) could transform the construction sector, however the road ahead must be carefully navigated.

This was the message from a round table hosted by Herrington Carmichael with The Business Magazine which looked at where the industry will be by 2030.

ROUNDTABLE PARTICIPANTS

Artificial Intelligence (AI) could transform the construction sector, however the road ahead must be carefully navigated.

This was the message from a round table hosted by Herrington Carmichael with The Business Magazine which looked at where the industry will be by 2030.

The discussion at the law firm’s new Farnborough office was attended by architects, developers and property agents from across the South East.

David Ayre, Managing Director of Hampshire architects Ayre Chamberlain Gaunt, said construction was ripe for tech disruptors.

He said: “AI can have a positive impact on the planning system as the whole process needs to be streamlined, especially the automation of application validation. Construction is probably one of the last inefficient industries, and I think we will soon see disruptors looking to change and speed the market up.”

Jason Lebidineuse, a director at Scott Brownrigg, which has offices in Guildford, said the increase in film industry construction had accelerated the pace of change in the sector and region by adapting methods of construction to be more sustainable.

“Artificial intelligence will have more impact on high tech buildings such as data centres, logistics, manufacturing and life sciences. It will help run these better, making them more efficient, with the opportunities of digital twins.

“The film industry is also driving technological changes in our built environment. We are already seeing virtual stages which means there is far less travel required by whole production teams.”

Ed Drysdale, Director of TPArchitects in Maidenhead, said technology was already improving safety in the industry through using data collected from wearable devices which could be processed by AI.

He said: “Some companies now put wearable technology on employees which links with equipment to prevent injuries. I think the data that will emerge from the use of this technology will help make the industry safer.”

However, notes of caution were sounded about the proliferation of AI –particularly around the protection of skills alongside the enshrinement of checks and balances.

Oliver Wilson, Director of Reading-based Thames Valley Surveying, queried AI technology oversight and warned about the risk of human checks being watered down.

He said: “The risk with this increase in data comes from who is validating it? Who is making sure that it is correct? It has to fall back to an experienced individual to review and check it is accurate and being used for the right purposes.”

The importance of human expertise was also underlined by Liz Hailey, Partner and Head of Real Estate at Herrington Carmichael, who said it was vital that experience within the industry was protected.

She said: “AI can supplement and speed things up, however there is an issue around protecting knowledge that allows the output of AI to be checked, humanised and put into context.

“This only comes from years of working in the industry and we have to protect this learning and knowledge alongside embracing the positives that AI can bring.”

David Ayre said the construction sector’s skills base would be transformed by advancing technology.

“We will, in future, be as likely to bring programmers into our business as chartered architects because we are going to need different skills.

“With the demand for digital twins, there will be a need to generate information quicker so we will need the rights skills in the industry.”

Construction on front line of climate change

The construction industry is on the front line against climate change and can make a seismic impact on carbon emissions during the building process and through the entities it creates.

The UK has a reputation as a world leader in sustainable technologies having made notable advances in developing smart grids, offshore wind and offering incentives for drivers to switch to electric vehicles.

Managing Director at Thatcham-based Francis Construction, Will Barrett, said: “If we sit back and rest on our laurels, then we’ll miss the opportunity.  

“The United States announced its green bond investment schemes and could quickly overtake us. We need to seize the initiative and take advantage of the prime position we are in. The construction industry can play massive role in being part of the solution.”

David Ayre called for tax incentives and a change of mindset in an industry whose default was to knock down buildings and start over again.

He said: “If we are going to stand a chance of keeping global temperatures down, the whole retrofit and refurbishment agenda needs to be reviewed. There has to come a time when VAT on refurbishment is reduced to zero per cent to incentivise change.

“We also need to look at the global building stock and consider if we have come to the limit – has the world has reached its upper limit of ‘built form’. Is knocking down a building and starting again the right option?”

Jonny Denton, Group Sales and Land Manager at Reading developer Darcliffe Homes, said the market had slowed the drive towards sustainability.

“The industry has made strides in sustainability, but we are all still working out the best way to approach the issue, and until the industry has got through this experimental period of what works, it isn’t going to be a buoyant time for house building.

“Delays in the planning system will also be a major factor in the lack of activity in 2024.

“Operating costs have increased and the market has had a bit of a wobble, combine that with an interest rate hike and it is currently a perfect storm.

“Everyone wants, and is aware of the need to be green. But these methods are more costly.

“The hope is that more opportunities will open up for people in the drive for sustainability and with more trades available in the market to choose from the costs, service and knowledge should improve as a result.

“Changes to building regulations have led to all sorts of interesting discoveries for house builders in terms of cost increases. I look at a lot of sites and with the new regulations, it is difficult for developers to make them viable.”

Financial institutions, however, are driving change in the industry through their insistence on companies having strong ESG (environmental, social and governmental) credentials before lending.

Melissa Magee, director at Slough architects Carless + Adams which focuses solely on designing integrated retirement communities, supported living and care accommodation, echoed this point while also highlighting the issue of stranded assets in the care sector.

She said: “In our sector, banks are insisting upon an ESG strategy from a business. The industry as a whole is learning to jump through hoops to make this work.

“We’ve got a massive challenge with stranded assets in the care sector A stranded asset is an old building that, if rated now, will be deemed as not fulfilling sustainability requirements.

“The challenge is funding the upgrade of these buildings so that they meet these requirements.”

Paul Nash, a construction consultant at Buckinghamshire-based Jansons Property, also pointed to how to finance the upgrade of legacy building stock.

He said: “The moment you talk to an investor, the first thing you must do is demonstrate your credentials around ESG.

“The country has a major issue with the amount of existing legacy stock. The ability of this stock to achieve an E let alone a B rating is going to require massive investment.”

Planning – a hot political topic

Planning looks set to be a hot topic at the next election with Labour and Conservatives both setting out their stalls on how they would reform the system to help ease the country’s chronic housing shortage and boost economic growth.

Labour has pledged to build one and a half million homes over the next decade and streamline the planning process, while focusing on affordable homes and new towns.

The Conservatives also say they would make it easier to build on brownfield sites.

Property Director at Farnborough-headquartered Lok’nStore Self-Storage, Tom Lampard, said a change of government would not necessarily result in an improvement to the planning system.

“If another government comes in, we will get another set of planning rules, but they never take away the last set, so you just get layers of bureaucracy and complexion.”

Client Director at Redhill-headquartered Verlingue, Ian McFadyen, said the fragmentation of the planning system presented a significant challenge for the construction industry.

He said: “There are 12 different regions of the UK and 12 different planning rules. We need consistency. Even with a different government, I can’t see this changing.”

Partner at Herrington Carmichael, Cesare McArdle, who specialises in construction law, underlined the issue of inconsistency on the industry.

He said: “The number one barrier to development is the length of time it takes to get through planning.

“Different councils have different lead times but this issue is across the board. Sustainability also presents challenges – there is a demand for car parking spaces when new offices are being built in local towns, but how do you align that with encouraging people not drive to work?”

The growing skills shortage

Like many industries, construction has a growing skills shortage due to an ageing workforce, Brexit-induced labour shortages and pandemic disruption.

Partner and Head of Employment Law at Herrington Carmichael, Alistair McArthur, said the industry must make itself more appealing.

“We need to recognise the skills shortage, he said. “There is new talent but it must be harnessed. The industry needs good quality people and we need to address this issue.

“We need to look at how talent is created through our schools, colleges and apprenticeships schemes. How should we encourage young people to join and develop a successful career in the sector?”

Construction sector seeing fundamental change

Construction, and the wider economy, is undergoing fundamental change due to technological advancements, the need for sustainability and international pressures.

Legal Director at Herrington Carmichael, Edward Jones, said: “The advent of AI is an industrial revolution moment. We are only seeing the start of what it can do and how it will affect skills in the construction industry.  

“The next two or three generations of AI and its application will be transformative. That, and other factors in the UK and Internationally, put us all in a phase of fast-paced evolution.  

“We will look back at Brexit and say that was the start of a decade of significant change.“By 2030, the way successful construction businesses work will be very different.”

Liz Hailey said change was becoming the new norm and companies in the sector had to adapt to a more unpredictable world.

“We have rising debt levels, increased funding costs, skills shortages and sustainability issues. We also have global crises left, right and centre which impact the market. But there are opportunities and a lot to be positive about. There are risk factors that we can’t control but we can influence. It is hard to say whether, by 2030, the impact of COVID and the subsequent rising costs will start to level out.”

Ian McFadyen said the UK construction market was still an attractive place to invest in. “There are a lot of European companies coming to the UK construction market, so I see real positives that people want to come here and work.

“I work for a French company, and I’m seeing other European companies coming into the UK. It’s important to be positive – there’s a lot happening in the sector.”

Principal Adviser at Kent-based A4G Chartered Accountants, Joseph Cutting, said that he could see increased opportunities for smaller players.

“We are seeing fewer residential developments so people are building smaller projects. The massive high-rise flats aren’t happening anymore, which could be linked to new restrictions. People are trying to avoid larger projects so the market, from what I can see, is shifting to smaller projects and as a result smaller contractors are benefitting.”