Spending cuts are an opportunity for the best firms to become more efficient.
The Infrastructure Show has arrived and this year it will be particularly poignant because on 20 October the government will announce the outcome of its Comprehensive Spending Review (CSR). I feel sure that few announcements have been viewed with such trepidation. Depending on who you talk to, the view about the immediate to medium term for the construction sector in the UK range from catastrophic to fairly dismal, most are already feeling the impact. Trade union leaders have talked about strikes and Ed Milliband in a recent radio interview has hinted at the potential for social unrest if the cuts are too deep and too far reaching. Most are hoping for the best but are expecting or already experiencing cuts.
It is not very surprising that capital expenditure has been a major target. That is what has happened in previous post-recession periods. The political consequences are lower than the alternatives and the consequences of cancelling large capital expenditure projects such as infrastructure and IT take time to manifest themselves.
Little comfort for construction
Sadly I think the construction sector will gain little comfort from the review. The public sector workforce on the other hand may be pleasantly surprised. Big government will not end anytime soon and even if the unions’ worst fears of a cut of 200,000 public sector jobs occurs this still only represents about 5% of the public sector workforce.
So the medicine is going to be unpleasant but, as appears to be the case in the manufacturing sector, it may just cure the patient. Manufacturing is seeing a real resurgence after years of decline. It is a leaner fitter industry which was described by The Bank of England’s regional agents as “the most buoyant part of the economy.” When was the last time you heard the words “buoyant” and “manufacturing” in the same sentence?
Perhaps the CSR will be a catalyst for the construction sector in the UK to become more progressive and entrepreneurial, seeking business in new areas and new countries, while championing greater efficiencies, as opposed to simply cutting back. By focusing on achieving greater efficiencies through cutting waste, improving productivity and taking a much more customer-centric approach, substantial savings are possible without impacting on, and in many cases actually improving, service to your customers.
This is not some impossible pipe dream. Of course it will not suddenly create lots of new projects but companies that utilise methodologies such as Lean and Six Sigma, to improve their business performance and focus on customer need will have a much better chance of winning the work that remains.
I look forward to the day when the Bank of England describes the construction sector as “the most buoyant part of the economy”. Let’s hope we don’t have too long to wait.
- Stuart Smith is Managing Director of Bourton Group and its subsidiary company The Six Sigma Group www.bourton.co.uk tel: 01926 633333