20 June 2023
By Claudio Veritiero, Chief Executive Officer, Peel Ports Group
Both the UK’s construction and logistics sectors are grappling with ongoing supply chain challenges, significant cost inflation and broader economic uncertainty. Having held leadership roles in both sectors throughout my career, I know there are natural synergies between the two that stand to be exploited, with the potential to bring about more collaborative working, elevate best practise and strengthen resilience.
In 2022 the withdrawal of government pandemic supports for businesses was compounded by record price inflation, which brought about a steep increase in insolvencies among companies in the construction sector. Although figures from the Office for National Statistics (ONS) showed an encouraging rebound in construction output in February 2023, followed by more muted growth in March, the overall outlook remains mixed.
A diverse portfolio can strengthen resilience
As with any other period of economic slowdown, residential property construction has been significantly challenged; the infrastructure pipeline, on the other hand, is likely to hold up well, given government commitments on Nationally Significant Infrastructure Projects and the continuing need for major infrastructure operators to maintain and develop their networks. The long-term impact of remote working on private commercial construction, meanwhile, remains unclear.
These conditions underline the need for construction companies to ensure their project portfolios are diverse. At Peel Ports, we witnessed first-hand an extreme example of this when, during the pandemic, construction projects ground to a halt overnight, but online shopping orders increased exponentially. The diversity of our operations is what safeguarded our business during that time, ensuring we could continue to operate and even scale up in areas that were immune to the economic circumstances.
The scale, stability, and lower risk contracting models associated with social infrastructure pipelines – such as for hospitals and school buildings – and economic infrastructure – such as energy and rail – will inevitably mean resources being directed towards public sector markets. But a mixture of both public and private sector work, across a range of industries, will provide the balance needed for companies in the sector to maintain a varied project portfolio, allowing them to remain viable and even thrive during periods of economic uncertainty.
Reaching across the supply chain
The construction and logistics sectors both have a critical dependency on extensive, deep and specialist supply chains – or, as I prefer to call them, “our ecosystem” – and these extend to local SMEs in the vicinity of our respective projects and operations. From my time working in both sectors I know there is plenty we can learn from one another in this regard.
In particular, the construction sector has been at the forefront of developing collaborative partnerships with both its customers and its supply chains. HS2 is a great example of this working in earnest, with a clear partnering approach between the client and its contractors who, in turn, are delivering the project through joint venture consortia, which bring together the combined resources and specialist skillsets of those organisations.
The way the ports and logistics sector has traditionally worked with construction companies is as an enabler of their operations: aggregates arrive at a port, are loaded onto trucks and transported to another site to undergo the manufacturing process before the resulting components are transported onwards to their eventual destination – the construction site. In recent years I’ve witnessed a fundamental shift in this way of working, as our role has evolved to see us become not just an enabler to these projects, but a real partner in the end-to-end construction process.
Port estates across the UK can do much more than just act as a passive stop along the journey for construction materials. They’re primed to play host to fully operational manufacturing sites, batching plants and storage facilities, and to become a point of consolidation for entire projects. This means when materials arrive at a port they are manufactured into components on site, without the need for them to be transported to an intermediary site. Effectively cutting out the middle-man in this way reduces the time, costs and carbon emissions incurred by the construction partner.
Working together in such physical proximity will naturally lead to more organic knowledge transfer, enriching perspectives on both sides and reducing the risk of missed opportunities. It will also automatically increase the skillsets at our ports, which will foster more varied jobs and apprenticeships at a time when both sectors – like many others – are struggling to recruit, and as the construction sector prepares to welcome more overseas workers, following new trades being added to the UK’s shortage occupation list.
Once this kind of partnered working becomes the norm and both sectors begin to reap the benefits, possibilities for new forms of partnership, potentially even formal joint ventures, will start to become evident in their droves, cementing the collaborative approach that will be vital to future proofing operations across both sectors. Between us we have all the knowledge and skill needed to thrive even in the most challenging of economic circumstances – all we need to do is reach across the supply chain and start the conversation in earnest.