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Think factory if you want to end the profits slump

Mark Hansford

The timing of this month’s theme – factory thinking – surely couldn’t be more apposite.

As we move through the “summer of profit warnings” the parlous state of UK civils contracting has been laid bare in ways that, while not really surprising, are still really rather concerning.

It all began in July with Carillion and its massive £845M writedown. The announcement sent shockwaves through the industry and saw 70% immediately wiped off the value of Carillion shares.

But since then other major names have shown that Carillion is not alone. Skanska soon followed and announced a £30M writedown and now, last month, Interserve announced that it would be pulling back on its construction workload after a £2M loss.

And there are more. Galliford Try has had to set aside £98M to cover costs on two major infrastructure projects, while Mace has revealed a 70% slump in pretax profits.

This is much more than a blip in the fortunes of some of the UK’s biggest players. The results issued by Carillion – and the others – must raise legitimate questions about how these firms are going to recover and move forward. The time, surely, has come to properly question the validity of firms operating on 1% margins (or lower) while attempting to recreate the wheel on every project. The inherent risks are just too obvious.

Low margin businesses can work, but not by continuously starting from scratch every time they produce something. The car industry does not work like that and neither do other manufacturing industries. They employ factory thinking and it is time that it well and truly arrived for construction in the UK.

Istock 588983090 1 crop1

Istock 588983090 1 crop1

Whatever you call it – jumping factories, flying factories, offsite factories or modular building – construction must increasingly resemble manufacturing. The benefits are too strong to ignore: higher efficiencies and certainty around build programme, cost, quality control and health and safety.

There are firms out there pushing this agenda. In national infrastructure, the i3P group of 22 major clients and suppliers have stated that manufacturing is one of three “strategic themes” in the recently released Technology Roadmap for the industry.

But, there’s still a way to go before the UK embraces offsite the way that Germany, Japan or other countries have done.

Take High Speed 2. Back in 2014 HS2 Ltd’s technical director Andrew McNaughton was urging his engineers to rise to the challenge and “join the 21st century” by refraining from doing things the way they have been done for many years.

His call was simple: “I want a 3D printed embankment,” he said, then. Fast forward to today and as far as I’m aware no factory-printed 3D embankments are being planned.

Advances have been made since 2014. Crossrail has embraced the mentality to a degree. A total of 250,000 concrete tunnel segments were manufactured near to site at the specially fitted out Old Oak Common factory. In another factory further afield, giant robotic 3D printers created large moulds from wax to be used to cast concrete panels.

Mace – one of those troubled by falling profits – has trialled a “jumping factory” on a tower block it is building in east London and Skanska, another of the troubled group of contractors, is also busy piloting its “flying factory” idea in Slough.

And there is much more being done behind the scenes. As always in this industry intellectual property is closely guarded and real cutting-edge thinking is often hidden from the public domain.

I suspect more will be done in this area in the coming months and years, but how will we know? How will investors know? Yes, efforts are being made, but we all need to hear more about them.

Mark Hansford is New Civil Engineer’s editor

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