Business and Enterprise Committee


The Business and Enterprise Committee today (16 July) publishes its Report, Construction Matters (HC 127-1), a major strategic review of the UK's construction industry. It calls on the Government to create a new post of "Chief Construction Officer" to tackle the problem of the fragmentation of construction policy and procurement across government, and to set the industry on the right footing to tackle the major challenges it faces both in the short and long term.

"Acting at a senior level as 'champion' of the sector, the postholder would provide a single point of engagement between the industry and the public sector, having operational involvement in policy and regulatory matters across departments," the report recommends.

Peter Luff MP, Chairman of the Committee said:

"When the committee began its work on the construction industry its commercial position was strong. Now industry, and particularly the house building sector, is facing a major downturn, yet it still generates over £100 billion of value-added for the UK economy€”more than twice that of the energy, automotive and aerospace sectors combined. The public sector is by far its largest client and can drive change across the industry.

"We need to take action to address the issues identified in this report, irrespective of the business climate in which the industry is operating. We agree with the industry that coordination on policy between the many Government departments that engage with and impact upon this vital industry is patchy and ineffective. We believe the appointment of a Chief Construction Officer would provide a single point of engagement between the industry and the public sector and so give this vital industry a stronger and clearer presence in government."

The construction industry provides employment for more than 2.8 million people. The sector contributed 8.7% of the UK economy's gross value-added (GVA) in 2006, and generated some £10 billion of exports. The public sector is the industry's biggest customer, accounting for around a third of output:€”it has the leverage to force improvement.

The report makes recommendations for improvements throughout Government's engagement with the industry where the Chief Construction Officer would play a vital role. Among its central recommendations are:

Public procurement and integrated working:

While the Committee welcomes the Office of Government Commerce's (OGC) new focus on implementing best practice in terms of procurement of construction work across the public sector, it is "seriously concerned that the Office has been provided with neither the resources nor the powers it needs to achieve this task." The report recommends that the OGC's staffing levels are reviewed as well as "the means by which the Office can better perform the role of enforcer of good practice across the public sector."

The report also identifies a weakness in that "government is not doing enough as client to engage with the supply chain early on€”a key feature of integrated working. As a result, the public sector is missing out on efficiencies that would deliver a cheaper and better quality end-product." The Committee calls for more emphasis on integrated team working amongst all departments procuring construction services.

'Bogus' self-employment and heath and safety:

The Committee heard evidence of the widespread practice of wrongfully classifying directly employed workers as self-employed, otherwise known as 'bogus' self-employment, which creates "significant costs for construction workers, clients, the wider industry, and the Exchequer." To tackle the problem, HMRC's Construction Industry (tax) Scheme now places a greater onus on contractors to verify the employment status of their sub-contractors. However, "the success of this new approach will depend on the collective 'buy-in' of contractors" and "Government must also ensure HMRC has the power and resources to monitor and enforce compliance," the report says.

The Committee was shocked at the rate with which fatalities have risen in the construction industry over the last year, with an increase in 2006/07 from 60 to 77, the highest rate since 2001/02. The report urges the Health and Safety Executive to "devote more resources to inspection whilst HM Treasury should look at ways of reducing the size of the informal economy," where most accidents take place. More generally, the report urges Government as a construction client to "enforce a change of approach in public sector construction procurement, and to drive culture change across the sector."

Skills and R&D:

The report highlights the need to provide training opportunities for the industry's future workforce, improve skills among existing workers and boost R&D investment. This is particularly vital as "one of the main sources of capacity growth in the construction industry in recent years has been the availability of skilled migrant workers," the report says. "Imported labour has helped mitigate the effect of skills shortages and facilitated the continued expansion of the industry. However, it will not provide a long-term solution to the construction industry's skills needs since, over time, most foreign workers will return to their home countries."

The Committee sees it as "a disgrace that only a quarter of construction companies are training apprentices" and calls on employers to "do their part by taking on more apprentices, tapping into the large number of people who want to work in the sector."


"The 2012 Olympic Games represent a massive challenge for the construction industry," the report says. Having heard evidence from the Olympic Delivery Authority (ODA), the Committee was pleased to see it is "adopting most of the best practice required to foster integrated working." However, "construction work has only just begun" and the report urges the ODA to "ensure its payment and contract practices are mirrored throughout the supply chain."

The Committee was encouraged by the project's health and safety record to date and welcomes the commitment to provide training opportunities and promote workforce diversity. "However, these efforts will be undermined if contractors are allowed to use 'bogus' self-employed workers," the report says. The Committee finds it "regrettable that the Authority cannot legally mandate direct employment across the programme" and the report urges the Authority to "encourage a strong preference for it as far as possible."

The Committee was "disappointed that the construction industry itself has not been more enthusiastic in bidding for the main Olympic contracts" with Balfour Beatty ending up as the sole bidder for the Aquatics Centre. The report expresses the Committee's "hope that the ODA will have a better response for its remaining construction contracts."

Peter Luff said:

"The scale of the Olympics construction programme is twice that of Terminal 5, but must be delivered in half the time. Although we have seen much evidence of good practice so far, we must continue to ensure that while the taxpayer gets value for money, workers are also being properly treated, and that both the construction process and the completed programme are as environmentally sustainable as possible."

Further Information:

Committee membership is as follows:

Chairman: Peter Luff MP (Con) (Mid Worcestershire)
Mr Adrian Bailey (Lab) (West Bromwich West)
Roger Berry (Lab) (Kingswood)
Mr Brian Binley (Con) (Northampton South)
Mr Michael Clapham (Lab) (Barnsley West and Pen.)
Mr Lindsay Hoyle (Lab) (Chorley)
Miss Julie Kirkbride (Con) (Bromsgrove)
Anne Moffat (Lab) (East Lothian)
Mark Oaten (Lib Dem) (Winchester)
Mr Mike Weir (SNP) (Angus)
Mr Anthony Wright (Lab) (Great Yarmouth)

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