North East England’s Construction Innovation Ecosystem
Research into the business base, strengths and challenges of the innovation ecosystem and recommendations for how to drive future innovation
Introduction
The construction sector is a substantial part of the North East economy, with the wider ecosystem estimated to represent 9,750 businesses and 95,000 employees, as well as £2.3 billion in regional GVA.
The industry is also an enabler for progress, with more than £600bn in expected investment in infrastructure nationally in the next decade, along with the £4.2bn of regional investment over 30 years as part of the North East devolution deal, a proportion of which will focus on infrastructure.
The sector is also one which is prime for innovation, with new techniques, new materials and digital transformation all likely to play a role in establishing new, more productive approaches to construction in coming years.
In order to better understand the sector, a group including the North of Tyne Combined Authority and the North East LEP commissioned a research report into North East’s construction innovation ecosystem.
The findings of the report, which was authored by Scius Advisory, Ryder Architecture and Hydrock, explore the key players in the sector, as well as the regional enablers of innovation in construction, and the barriers which exist to further growth. The headlines can be viewed below and the full report downloaded here.
enterprises directly involved in construction innovation
estimated turnover from these innovative businesses
are SMEs with fewer than 50 staff
have at least one office outside the UK, showcasing our global credentials
“I think we need to seize the opportunity of a new Combined Authority to really set out a regional approach and to encourage engagement, best practice sharing, and also blow our own trumpet around the things that we do well”.
Sandra Manson. Developing Consensus
The Context
The construction sector represents around 7.5% of regional employment, and 5.5% of regional GVA. The health of the sector is therefore crucial for the broader health of the North East economy.
However, the report quotes CITB figures which show the North East construction industry is at risk of stagnating. Contract awards and detailed planning approvals fell in 2023 compared to 2022, and project starts remained flat against 2022.
Projections suggest that the volume of work in the region will grow slowly, with an average annual growth rate of 0.9% to 2027, below the national forecasts of 1.5% growth.
Infrastructure is identified as the largest sub-sector, with £1.05bn in North East projects in the first half of 2023, followed by private sector housebuilding with £738m and commercial property with £528m of projects.
The North East construction sector is also the smallest in the country, with 3.0% of Britain’s construction employees, and the lowest construction output of any English region with £5.17bn.
The North East devolution deal may provide an opportunity to stimulate the sector through measures including £69m for housing regeneration, £48m a year to support inclusive growth, £60m a year for adult education and skills, and £900m focused on transforming transport.
However, to do that it was first necessary to understand the drivers of construction innovation globally, the current business base, and the strengths and weaknesses of the current ecosystem. The headlines across these areas from the research are summarised below followed by the report’s conclusions and recommendations.
Trends and drivers of innovation
Innovation is crucial to closing some of the divides between the North East construction sector and the rest of the country, and ensuring that businesses are as productive as possible. The report identifies the following set of influences of innovation in the construction sector.
North East innovation ecosystem
To map the current innovative business base in the region the report identified existing construction firms using companies house. Web based research and interviews with leaders were used to understand their use of technology and innovation.
people working in innovative construction businesses
providers of education programmes with construction elements
of firms have a turnover of below £2m
of innovative construction firms with out of region location
The report also divided the broader ecosyem into three pilliars, enterprises, stimulus orgnasations (such research groups and incubators) and education providers. Each of these is a crucial backbone to the ecosystem in the North East.
Ecosystem strengths and challenges
Having reviewed the current ecosystem, the research then identified the current strengths and challenges of the region facing the North East currently.
Our strengths
1. Early leadership in BIM has seen a strong digital construction cluster develop in the North East
2. A vibrant advanced materials cluster with technologies applicable to construction
3. Collaboration and community at the project, sectoral and industry levels
4. Presence of large companies with national and global reach, which is important for enabling innovation
5. Fiercely competitive local market, which encourages firms to be creative and agile
6. High quality research, with high-rated universities, National Innovation Centres and numerous centres of excellence
7. Innovative education programmes, where industry and providers have collaborated including the PlanBEE apprenticeship programme and highly-focused skills boot camps
8. Affordable rents and available space for start-ups, including incubators with serviced office space to support early stage businesses
9. Available data to benchmark innovation, for example Constructing Excellence’s national industry KPIs
10. Incubators helping large and small firms collaborate, including through Dynamo, IC3 and Sunderland Software City
11. Innovative local construction education programmes, such as the BIM Academy and PlanBEE, which have even been exported to other countries
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Gaps and challenges
1. Slow to capitalise on early leadership of BIM, and it has been difficult to sustain that leadership as there has been a lack of support
2. Industry short-termism, resulting from the nature of projects and the hand-to-mouth existence of many firms in the industry. This means short term needs and survival are prioritised over forward planning and investment
3. Lack of regional industry data, which would allow tracking of the health and performance of the construction sector in the North East
4. Lagging in the shift to low carbon bio-based materials, despite the region being home to the Hub for Biotechnology in the Built Environment
5. Lack of knowledge sharing in innovation, with a lack of a coordinated centralised platform for case studies, testing programme results and similar information
6. Lack of construction-specific innovation funding, which recognises the different support required and different investment models existing in the sector
7. Lack of incentives to innovate, such as government-backed guarantees or insurances, which can help counter the construction industry’s tendency to be risk averse
8. Over-complicated research support programmes, which can make them difficult to access, with few opportunities for support for project-based R&D
9. Regional ‘invisibility’ which limits the region’s ability to attract investors
10. Inconsistent procurement processes which can hamper the adoption of new approaches, even where they are mandated
11. Regulatory challenges, where there is over-complication or measures which are inconsistent with the adoption of innovative products and practices
12. Lots of talk, less action, despite the existence of networks and catalysts which foster innovation, there are few opportunities for the meaningful exchange of information
13. Labour and IP ‘flight’ as skills and knowledge exit the region, often in the form of early stage companies wanting to be closer to investors and talent
14. Lack of change management support, as programmes tend to focus on capital investment in new technology rather than enabling the required operational
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Conclusions and recommendations
Based on the existing ecosystems and the strengths and challenges facing the region, the report concludes with 10 recommendations to drive future innovation in the construction ecosystem.
The report ends by highlighting that broad industry support is crucial for nurturing an innovation ecosystem, and that perhaps the most important factor the research revealed was the existing of a strong community in the North East. 51 buisness leaders were willing to make the time to dicuss and their insights and enthusiasm were clear to see. It will be important for the ecosystem to build on this energy, goodwill, and community in the future.
"The construction sector is critical to enabling regional economic growth. A sector in its own right, employing people in a variety of careers and professions, it also cuts across our economy, facilitating growth and development of other sectors and services" - Helen Golightly, North East LEP
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