Government is determined to cut the deficit, and to create a more efficient public sector estate. But it’s hard to save money when investments need to be made, and difficult to shrink landholdings without constructing new buildings. Across government, departments are investing in efficiency; refurbishing offices to support estate rationalisation projects or building new service delivery premises with lower running costs. The result is that, counter-intuitively, this government has a more ambitious property development programme than anything we’ve seen in years.
Elements of this construction work have their roots in civil service reform. HMRC, for example, is exiting over 150 buildings to centralise staff in 13 regional hubs, whilst the MoD is to quit many of its 1300 sites – prompting a major redevelopment programme to house its remaining workforce. Meanwhile, civil service property management reforms drive up the cost of Whitehall premises, and as a result staff are being reallocated to cheaper premises.
Service delivery and policy changes demand another tranche of building work. For example, the Ministry of Justice’s ambitious plans to exit Victorian prisons, building a new generation of modern facilities; the shift of DWP staff from JobCentre Plus outlets to office-based digital and telephone roles; the energy department’s interest in small modular reactors. The government needs free schools and academies; specialised medical facilities; a new generation of gas and renewables power plants. Put together, this is an awful lot of construction activity.
Much of this building work is driven by the need to cut costs. But, with exceptions (the Olympics for example), the civil service has a patchy record on delivering major projects, regularly encountering delays and cost over-runs. And with the addition of the purported skills shortage in construction this further adds to the uncertainty in project delivery. Consequently, when these construction schemes go awry, the projected project benefits may take longer to arrive, or fail to materialise at all.
Meanwhile, the government is determined to tackle the housing affordability crisis, increasing housebuilding and reducing price inflation. And it is prioritising support for British industry, focusing particularly on high-tech manufacturing, engineering and design businesses, export industries, and job creation in the ‘Northern Powerhouse’. We at KPMG think there’s an approach that could achieve all three goals –improving certainty and efficiency in the government’s building programmes; by speeding up housebuilding and reducing price inflation; and supporting a nascent British industry with huge export potential in a fast-growing global market.