Worker shortage could derail Kiwibuild, warns UK expert

The government's flagship Kiwibuild programme is doomed to fail unless the construction sector can find a way of addressing the chronic skills shortage, says a leading adviser to the UK government.

Mark Farmer, author of the hard-hitting 2016 report 'Modernise or die: Time to decide the industry's future' is visiting New Zealand this week to talk to business and government leaders.

He argues worsening skills shortages in the construction sector will see house prices increasing and quality falling - even if the government solves other problems, like availability of land.

The government has said its Kiwibuild programme will deliver 100,000 affordable houses over the next 10 years, half of them in Auckland. That's not going to happen without a radical rethink of how the construction sector operates, Farmer said, particularly in terms of lifting productivity from existing workers.

"Japan lost 30 percent of its construction workforce in last 14 years - that's how bad it could get," Farmer said. Even in New Zealand, far more builders and tradespeople are leaving the industry each year than are coming in, a situation which will push up costs, delay vital building projects and increase the chance of shoddy work.

"I believe New Zealand is going to experience massive volatility in terms of construction costs over the next few years. And that's all down to the supply of labour."

Relying on migrant labour won't work, he said, as there aren't enough skilled overseas workers available. Instead, the industry needs to train far more local talent, creating attractive long-term career opportunities in the building sector.

But that still won't be enough.

Farmer said there also needs to be a fundamental shift in the way the building sector works to make the industry more efficient with the workers it has. "Pre-manufactured value" is what Farmer calls it - increasing the amount of a house that is made in a factory or workshop and assembled on site.

Traditionally, around 40 percent of any house is pre-made - windows, doors, bricks etc. But a new UK Government affordable housing project, Homes England, will see that percentage rise to as much as 65 percent in some cases, Farmer said, including pre-made wall and floor systems, and even whole bathrooms or kitchen fit-outs.

"Prefab" has had an image problem for many years, but Farmer warns increasing the pre-manufactured value of New Zealand's new homes is critical to solving our housing crisis.

Corporate failure rather than Kiwis living in cars may push the local construction sector to reform. A slide in Farmer's presentation reads: "If necessity is the mother of invention, discontent is the father of progress".

"Our industry listens to nothing. It could be sitting in the middle of the road, with a bus coming, and it won't change until it's too late," he said. "But discontent is coming from within. Many contractors have lost money, or have made next to nothing in boom time. Big companies have gone under."

Britain's second-largest construction company Carillion collapsed in January, owing more than $3 billion. And angry customers with unfinished or sub-standard homes are using social media to express their displeasure at UK building companies in a very public way - something that's also not good for corporate bottom lines.

Fletcher Building recently announced a $273 million first-half loss after spectacular cost-blowouts on several major projects. Smaller companies have gone out of business altogether, like Bagley & Blake Construction, which collapsed in 2017. The company blamed a highly overstretched building sector.