You are now tuning into the Own the Build podcast. Join Ceiling's very own Paul Heming, where each week he interviews experts from the world of construction and asks all the important questions around intelligent construction management. Hello and welcome to episode 183 of the Own the Build podcast with me, Paul Heming. Today, I am sharing our mini guide to digital signatures you'll have heard us banging on about this endlessly throughout the last few episodes. And this quick download outlines five reasons why the construction industry, main and subcontractors need to start embracing e-signature technology, reduces disputes, saves you a load of time. There's nothing to stop you from doing it. The downloadable gives you an easy pathway to enabling them in your company. I very much recommend you go to the show notes and have a look right now. On to the show. In the studio today, I am joined by Nicola Sharkey, QS and Head of Intelligence at Gleads, a global property and construction consultancy, who I'm pretty sure everybody has heard of. As part of her role, Nicola is involved in delivering standout, easy-to-read construction market reports and strategic insights. And today, we will be discussing the latest iteration of that, the Q3 2024 market report. I'm really excited to have Nicola on the show. Nicola, how are you? Yeah, well, good. Thank you, Paul. I'm really excited to be here. Thanks for asking me. Thank you for doing what you do for the industry as well. That's the reason why I invited you on the show. I'm interested to learn more about you, your background and talk more about what Gleads' perspective is and where we're at as an industry generation. Thank you for coming on the show. I've tried to introduce you. I know your background is quantity surveying. Come on, we're all happy with that. Just talk to me about your career experience, what you started off doing and how you've now arrived to being Head of Intelligence at Gleads. Yes, quite a big question. I started in the industry over 15 years ago as a trainee quantity surveyor. I undertook my quantity surveying degree part-time whilst working. Following that, I did some more studying to become a member of the RICS. Shortly after achieving that, I moved to Gleads. I've now been at Gleads for 10 years. The past four years I've been working on our market reports as you outlined. We started off doing the UK report during the pandemic whilst working on projects and then slowly transitioned into moving into doing it full-time leading the intelligence team. Working with our intelligence leads in our offices around the globe producing our regional market reports. Awesome, it's great. I have to give you credit here, Nicola, because I did something similar to you. I did the part-time QS course for five long, arduous years whilst I was from 18 to 23 or 19 to 24. I can't remember. I have to say that when I got to the end of that five-year process and somebody said, "Do you want to do the APC for another couple of years?" I said, "Oh, I do not. I didn't want to do it at all, but you actually went ahead and did it." What has that given you? Can I ask? I think it's a industry benchmark and particularly on the consultancy side, I think it's expected that you would do the APC, but it unlocks, for me, career progression and more opportunities to learn and do different things. I think if you want to work abroad or just open so many opportunities up. Amazing. It's quite an unusual title that you have, head of intelligence. It's quite a good one, isn't it? I bet you like that one. Just talk to me about why it is that leads have a head of intelligence and why it is that these market reports, which it sounds like started during the COVID period, why they're important. Gleeds has produced market reports for quite a long time, but there was a period where they stopped a bit, so we picked them up again and the timing of picking them up again was a really important time for the industry. Things were constantly evolving and the COVID-19 pandemic brought huge challenges to projects and project delivery. We found that the reports helped equip our teams with what was going on and potential risks and ways of mitigating the risks. I'd say the industry in general is facing quite a lot of challenges, so there was the pandemic, then there was Russia's invasion of Ukraine and then there's just ongoing global tensions and all the effects from that with materials cost escalation and difficulties sourcing resources, but then there's the ongoing labour challenges and then the fact that the built environment contributes so much of the emissions adding to the climate crisis and how as an industry we overcome all of those. I think the reports helped us facilitate discussions around that and start conversations within the industry. Yeah, and it's been a pretty interesting time, probably, for you said you've been doing this for four years, now you've been doing it during some quite turbulent times, right? What have you learnt through doing it and how does it actually empower your colleagues? What's the feedback they give you so you're doing it for them? What is that feedback? I've actually found it really refreshing to see all the different sides of the industry coping with these huge external factors that aren't of their making and the spirit of collaboration and coming together to still deliver the projects even through these huge challenges. We've had a lot of feedback from our colleagues that the reports have helped initiate discussions with project teams, particularly during the pandemic when we're recording different issues with materials and what the feedback course from suppliers and leading times and just enabling them to start discussions about potential issues earlier and just with clients trying to explain what's been going on and even we've had all parts of the industry really give us feedback about how useful it's been because we use a market survey to inform the reports and that gathers viewpoints from across the industry but then the contributors, for instance, contractors, have been able to use that data to show that there are genuine issues if that happens rather than just being able to put some science behind some of the issues, for instance, like productivity challenges, the restrictions during COVID and all those kinds of issues. We've had feedback that clients have used our data to inform reports, all kinds of stuff really. It's been really interesting. No, and I know just how valuable external reports from a third party can be to anyone in the industry, right? I was with a client and I'm not sure if it was a Gleeves report necessarily but I know how much it empowers that during post-COVID, or it was probably still technically COVID, it wasn't a 21-22 with the supply chain and inflation and material prices, et cetera, et cetera. I know that industry reports are used by contractors to try and support claims where it is valid and where there is genuine challenge, so that completely and utterly resonates because you do need that to support your thesis and actually to support the reality of what is going on in the market and in that respect it's incredibly useful. I've read the report, so it's really, really good. Before we dive into what it's telling us about today, you've mentioned how you've, it was a bit of an overview there of how you actually gather the data. Just talk us through what your process is and what kind of data you do collect. Yeah, so we feel we have quite an extensive process. We've conducted a survey since we've taken over producing the market reports again and we see that as sort of a key part of the process. We're in constant dialogue really with our experts around the UK business. We're part of the BCIS tender price index panel and we're regularly speaking to clients and presenting on market conditions. So from all of those things and obviously reading trade press and following other sources of data, we build up a picture of like the trends and hot topics that allows us to sort of think about the questions and set the questions for the upcoming survey. The survey goes out and anyone in the industry is welcome to take part in it. I know there are a few industry surveys, so it's great if you can support one or all of them. I know they're taking a little time. Respond into a particular guide. So we get good responses from contractors, subcontractors, clients, consultants, suppliers, just a real cross-selection industry. And are you looking for new people on a regular basis to support it? Are there certain parameters of organization or professions that you're seeking? Because you're talking to thousands here and could it be that there are main contractors, subcontractors, consultants that you're looking to engage with to get this sentiment? Yeah, I always love data from contractors and subcontractors in particular because of all the trends and obviously a very close to project delivery. But any response is great in my book, they're more data, they're better. And so is it sentiment that you're after or is it like what are the types of questions that you're asking and what are the kind of outputs that you're getting? It's all kinds of stuff really is trying to understand the different factors influence in projects, I guess at every stage. During the pandemic, we're looking at productivity and ways of overcoming some of the challenges, whether people see issues with materials, inflation forecast is quite a key thing of what we do as consultants. So there's questions about that. But each survey, there's probably some sort of core questions where we're constantly tracking around materials, labor, threats and opportunities, I'd say. And then there's what we call hot topics, so questions for that particular survey. So our most recent survey was obviously just after the general election results, so a lot around the new government and their policies. Okay, great. And so in the second half of the show, I want to dive into the detail, if that's the right way of putting it. But before we do that and before we get to that, just give me an overview of the report of your findings and where we're at in your opinion. So at the turn of the year, it was all maybe slightly bleak, I guess, and very uncertain. The UK entered technical recession at the end of 2023. Interest rates were elevated compared to recent norms, inflation was still high, the residential sectors was sort of in the downturn. But within our data, there were still sort of hints of optimism despite that. So in our first quarter 2024 survey, only 18% of respondents thought there'd be fewer tender opportunities in 2024 than in 2023. And I just say our report since then have continued that sort of cautious optimism. Obviously recently we had the interest rate cut and the general election result, we've got all the great new policies from the government. But there's still a sort of hint of caution in the background or more than a hint of caution due to the sort of skills, shortages, and capacity issues. There's at least stability now in perhaps a way that we certainly didn't feel we had in Q4 last year, Q1 this year. And it's interesting because our business at SeaLink, we're forever speaking and watching data from clients, main contractors, and subcontractors. And as a result of that, we can see trends ourselves in kind of like the shape of the market, how things are moving. But interestingly, I get a lot of, or I have a lot of conversations with clients, main contractors and the subcontractors. And you can kind of see the, trying to think how best of it, like the timeline of how optimism or cautious optimism changes, because definitely the end of last year, it felt to me that everyone was pretty down in the dump. So it was a bit cautious, didn't feel like there was much confidence. And I felt that definitely over the last two months, you've started to see that change, last two quarters, I should say, you started to see that change with clients who are now looking forward for what they're going to do in 24, 25 and beyond. And then you kind of see in the second quarter, main contractors start to feel themselves that little bit more optimistic. And now you're starting to see subcontractors, perhaps in this quarter, themselves kind of catch up with that. Is that something that you feel, do you feel like we're at least gathering momentum from a particularly poor 2023, I think housing residential was down about 20% wasn't it? Yeah, I definitely feel it's much more positive. It feels like it's gaining momentum. Some of the challenges are still there, but it definitely just feels more upbeat. And as an industry, we're willing to try and overcome them and or look past them and carry on anyway. No, that's fantastic. And that's good because it's like the anecdote to do. That's how I feel. And that's how it feels speaking to the people that I'm speaking with week in week out. But let's do in the second half of the show a deep dive into turning that anecdote into a bit more reality. In construction today, a severe shortage of trades has become the norm. We talk about it a lot on the show, but for a main contracting business to thrive, you must create an environment that attracts subcontractors. At C-Link, we've worn the hats of subbies, main contractors, and we genuinely know what both sides needs. For main contractors, effective prequel is the linchpin of your success on any project. If you had real-time data on your supply chains, insurance, accreditations and financials, and even a wider pool of subcontractors to speak to, that would empower decision making. For subcontractors, they want to receive comprehensive tenders with everything that they need to give you a good price. If you do that, you will massively increase your tender return rates. So, if you're a main contractor and you want to learn how to access real-time prequel data, grow your supply chain, and deliver world-class tenders you need to see C-Link. To find out more, you will be able to click a video in the show notes right now and also book a demo to speak to one of our team. We look forward to speaking to you soon. Interesting start to the show, Nicola, and actually, on that cautious optimism line, it's interesting because I saw one of your posts, I think it was last week, where you were talking about bits and pieces from the survey, and one bit really caught my eye, which is where you had said that the recent GLEED survey revealed that companies are shying away from tendering work due to capacity issues and contractors playing it safe. And now, when I first read that, I think, are we more optimistic about the world that we're in, or are we actually less optimistic? But then, if you take a bit of a step back and you were saying things like factors like subcontractor failures, labor shortages, et cetera, mean that contractors are actually taking it a bit easier and not always saying yes, yes, yes, as has been the past. There's actually a reason to be optimistic. I don't know if you could just talk around that topic for me. Yeah, so since probably beginning of last year, we've been asking this question about two contractor respondents of our survey, whether they or their supply chain have declined to attend in the past quarter. And we've generally seen levels sort of between 80 and 90% that say that they have or their supply chain have declined to tender. In our most recent survey, it was 80%, which was down from 89% in the previous quarter, but it's still a high proportion. And the reasons given are due to like the risk profile of the project or proposed tender or contract conditions, or a lack of capacity or a combination of those. And there are a few other comments around, you know, client relationships and the sort of ongoing strategy adopted by that client. And I think it's quite an important step. I always highlight it, because there was this expectation at the end of last year that tender price inflation was going to drop because there was more availability in the supply chain, you know, particularly those working on residential projects, for example. But because of, you know, all the recent issues, we spoke about earlier, there's been significant cost escalation, there's labor shortages and issues. We're noticing that the supply chain is pretty cautious. And, you know, they've really taken the time to understand the project and check the risk profile. And they're not always willing to accept the conditions that clients want to propose, which I think is actually a really good thing for the sustainability of the industry. And unfortunately, we've seen high levels of in solvents using construction that's taken capacity out of some local markets. So I'm not surprised when you delve into a bit. It's not that surprising a stat, but it shows really well why there's caution in the market, or that there is caution in the market, I should say. Yeah, but also that that caution is perhaps coming from a position of strength, right? And actually, it kind of gives a strength in the supply chain in that they're feeling that they, you know, we can't take on this risk. I think you talked about risk profile client relations. And we've talked about it loads on the show, and I know you listen to the show. And we've talked about almost like, as a supply chain, saying, no, I can't tender, it'd like a responsible way. Like, we won't go forward on this particular project because that risk profile, that design responsibility, that contract, those contract conditions, no more. We're not doing that anymore. So I'd love to say that maybe we're having a small impact through what we do here, but I'm probably going way off piece there. But that actually enthuses me, to be honest with you, Nicola, to hear that actually, as a collective, we are starting to push back a little bit, whether that's the sub and the main consciousness of the clients, because to really create positive change in the industry, I believe that we have to do that. But I've always been a little bit mindful that there's always someone who is willing to say, yes. And so I think it's a good thing to see that that statistic is there. And I know that you're more client side, consultant side. So you probably have a completely different perspective or experience from me. How does it make you feel? No, the way. I feel it's quite an empowering statistic for the industry as well. I think everyone needs to make money, right, to be able to invest and innovate. And I don't think anyone sees any joy in, you know, contractor or subcontractor or supply chain failures, and the consequences on projects is enormous. So even for that reason alone, you don't want to avoid them. But for the ongoing, you know, just perception of the industry and people being able to deliver a good product and all the expectations, you know, from the public around public procurement and value for money and delivering the policies and objectives set out. I think you need to have a profitable industry to be able to make that investment to build the capability and a robust and strong, right? Because so often the expectations that we have or that public procurement or new regulation or contracts or whatever is put on the supply chain, there's such a great expectation and a growing expectation of growing responsibility that there has got to be a bit of a change, in my opinion, to reset the boundaries, right? And so we can do all these things, but it's going to take us to a new level, right? And so I think I'm optimistic anyway, here in that statistic, and I'm pleased that you are too. Just in terms of then looking at like the depth of the report and what it really tells us. So I saw that the S&P Global Construction PMI is starting to show optimism. And I thought, what is the S&P Global Construction PMI? Like showing my naivety here, but could you just talk through what it is and why it's significant? So the S&P Global UK Construction Purchasing Managers Index PMI is an index which tracks change. So it's published monthly and it gives a reading, and any reading above 50 indicates growth in the industry. It's a release, so it's made early part of the month and it looks back on the previous month, so there's not a lag in the issue of the data. So I find that really useful, isn't that? It's almost an immediate gauge of what's going on. And the sort of press release includes details, including like civil engineering, housing and commercial activity, and also insights on like supplier issues, input costs, hiring, future optimism on workloads and stuff. So because it's like a panel response, you get all these sort of anecdotal insights as well, a bit like our survey, and it gives a real lot of information, but it's quite punchy and it's quite soon after the surveys clated that they release it. Is it somewhere that you would point all construction professionals to go and review? You're making decisions, like particularly business owners on the direction of travel, whether you should be feeling more optimistic, because that's a question you get asked a lot, isn't it? Are you optimistic about where we're at? And a lot of people go, "Yeah, well, I received seven tenders last week, so yeah, feeling pretty good right." And then the next week, no tenders, I know I'm being a bit facetious with it. No, no, no, yeah. Do you agree? I think it's really useful. You mentioned earlier about the sort of variety of reports, and I think that's a real positive. We've just launched a lead sentiment score, where we're using natural language processing techniques with artificial intelligence. That sounds like a James Ghanaism, that does to me. How did you know? But that's looking at this kind of thing and the trade press and social media to sort of track sentiment. And I think all of these kinds of things that give the science to how you're feeling just helps to give credibility to what you're saying and whether you're on a right track or not, I guess. Yeah, no, I think that too much of the way our industry runs is anecdotal, and we can be much more data-led. And I think a lot of what we're talking about here, whether it's that natural language model first sentiment that you guys are talking about, whether it's this report that you guys are doing, the S&P Global Construction PMI, there are actually huge volumes of indicators out there that anyone can go and look at, and the S&P Global Construction PMI is one that, as you say, it's like here and now, because you're sentiment like months on months as to where you're at. So amazing. Just talk to me through, you mentioned interest rates and inflation, and the situation we're in in Q3 2024, much better than the situation we were in Q4 2023. So there's been an improving six-month period. Why does it matter? If I'm a QS, or I'm a subcontractor, a main contractor, why do these things matter to me? I think there's been a lot of projects stalled because of the environment we've been in, with high interest rates and high or elevated costs compared to recent norms. So the recent interest rate cut, the first one, since the start of the pandemic, March 2020, means slight easing of those pressures, and we're starting to see some projects which have been stalled for quite a while are being picked up again and progressed, which is obviously good news, which means more tender opportunities, more project opportunities are coming through, and it just creates that environment, I guess, where there's more activity, more chance. And you can pick and choose those projects. I'm being, again, over exaggerating, but you have more projects to choose from potentially because there's more money in the ecosystem and there's more activity. And you tie that too, because I talked to the Construction Products Association back in January. And we were looking at, I think it was their 2023 review looking into 2024. It was really, really interesting conversation. And one of the biggest threats they had highlighted was labor, supply, and skill shortage. And your report goes on to talk about that as well. And, you know, I worried about the fact that at the end of 2023, where the biggest subsector of the industry, which is residential or housing, was 20% down. But there was also this labor shortage. It felt to me like we potentially had a bit of an issue in the future that we weren't even really aware of, because demand was down, which meant that supply could in theory be down. But as we started to rebound and things were getting better, and we were more optimistic inflation interest rates, all these good things that then lead to clients wanting to execute projects that actually would be in a really tough spot when that happened because of this ongoing labor supply and skill shortage. Could you talk about what your perspective and what the survey tells us about that? So we've been tracking labor availability issues and labor rate increases since we started doing the reports again. So interestingly, the past couple of surveys, we've seen lower proportions of respondents reporting issues with labor availability. So in our most recent survey, 20% of contractors reported issues in their region for 2Q24 and the survey before that was 15%. And I think that shows that translation of slower activity and projects moving slowly towards site and alleviating some of those issues in the short term. Just to put that into perspective, the third quarter survey last year, so looking at second quarter 2023, 55% of contractors reported labor availability issues in the quarter. But although there's this short term improvement, still a fairly significant number of people reporting issues, and there's like particular trade, so mechanical and electrical trades, and highly skilled specialist labor reporting issues with that, and sort of local hotspots for issues. But completely as you say, as activity now begins to rebound, we'll see the levels reporting issues increase. And there's been quite a lot of data and publications about the long term issues. For example, the public accounts committee report published in May highlighted significant barriers to infrastructure due to labor and skill shortages, not least global competition. So it's a real issue, it's like a short term improvement in our data, but it's not really an improvement because it's just because of the slowing activity. We haven't overcome any of the obstacles to attracting more people. It's not a positive reason why we're seeing that. Yeah, that makes sense. And actually listening to you talk there, you know, when I was speaking to Noble Francis from the Construction Products Association, he was saying to me, and I was taking that example of housing being 20% down, therefore, that should mean that there's less demand supply, etc. So he actually said the main problem in terms of skills and a lack of labor is actually around infrastructure because of exactly what you've just said there is that the global competition is much more, much more difficult. So is there anything and appreciate the new labor government hasn't been in for a huge amount of time? And therefore, much of the policy and changes are going to happen in your upcoming reports and surveys. But is there anything around the general election and the political developments associated to that, that you can see impacting the following quarters? So in general, I think the reaction to the new government has been positive in our most recent survey, nearly 70% said they feel construction and real estate are priorities for the new government, which, you know, before we'd asked similar questions and felt fairly low in the priority list and felt the industry wasn't listened to, couldn't shape policy, etc. The announcements of, you know, building more homes, reforming, planning, and speeding up infrastructure delivery, I think have all been well received. But there again, this sort of cautious optimism, because, you know, underlying all of that is, is there going to be the capacity to deliver, to deliver that? And with the strain on public finances and the cutting of projects and reevaluation of things, the industry needs long term pipelines and commitment to be able to invest in skills and innovation needed to overcome some of these challenges. And whilst the ideas are all really good, and this all very positive, there's, you know, which may not necessarily be due to a lack of willingness or anything else, but just, you know, the overall environment. Yeah, the cold hard realities of life, right? That's, again, I certainly feel like there is at least clarity on what the fact that construction, the built environment will be given some level of priority. It's at the forefront of what the new government are doing. There's a lot of good noise coming out about, you know, reforming, planning, specifically, particularly more planning officers. There is still, I think, most people in our sector are particularly QS's are natural cynics, right? And you do think, well, it sounds good, but I do worry about how we're going to get there and what it looks like because it's such a complex beast, isn't it? But you talked briefly about, you know, adopting new technologies. I know that in a few weeks time, I'm going to have your colleague James Garner on the show to talk through your AI and technology report. Just what do you see from the report in terms of IC now? And again, this is very anecdote to us. There are digital transformation teams popping up in a lot of tier one companies, which, as the founder and CEO of a software company, it's kind of music to my ears, as you can imagine, but often these trends can be quite temporary in construction where, you know, there's a new idea for a few years, it doesn't quite get executed in the way that it could do, and you don't get the response. What are you seeing from the data of your survey respondents about technology adoption? I think it's another one where we're seeing momentum building. We've asked for the past year or so, we've asked the same question about have you used an artificial intelligence tool to support a workplace activity? And the results have generally hovered around a third of respondents have, and this survey was 41%, so a bit of a jump. But just in general, there's been quite a lot of reports and industry bodies getting in behind. So in June, the CIOB launched the AI playbook, for example, the RICS have various things, but they've got the tech partner program, where they're sort of trying to encourage collaboration and innovation and discussion. The government, or the previous government at the time, there was the data analytics and AI in government project delivery report. So to me, it just feels like there's a lot more conversation happening about it. And then, as you say, lots more teams popping up, which is great, I think, just a way. Yeah, I agree. It's music to my ears, I can very much assure you. But just to kind of wrap up, and I'll take it back to that question that I asked you at the start of the second half, really. It's, well, maybe it was the end of the first, I forget. But as head of intelligence at Gleeze, you sit in a position where you are permitted and encouraged to go and look for insights, you're gathering your own research, you're doing your own research, and you have an amazing overview of where we are. And I'll take it back just to that anecdotal of question of how do you think the industry is doing, which you probably get told all asks regularly, and everyone listening is wondering, and everyone probably thinks, yes, feels like it's doing a bit better, right, is probably what most people feel. If you were to give advice to construction professionals who want to be more data-driven, understand much more about, much less anecdote, much more data, where would you recommend that they go beyond just the Gleeze survey? Of course they're going to go there. But are there things that you recommend? Certainly interested one. I don't think you can beat the trade press really for all social media, where everyone's posting latest articles and trends. Some of the things I've mentioned, like the S&P, Global PMI, UK Construction PMI, the RSCS Construction Monitors, a lot of consultancies reports and stuff are all picked up by the trade press, so I think keep it simple, and that's an easy access way to finding out what's going on in the market. Awesome, and I imagine that by the time I'm sitting down with James, he's going to be wanting to talk me all the way through this natural language model for sentiment and trade press and everything else, so that will no doubt come up. But thank you very much for coming on the show, Nicola. I'll be sharing your details, I'll be sharing the report as well in the show notes. It's been an absolute pleasure to have you on, and I feel a little bit more optimistic just having spoken to you, so I'm sure everyone listening does as well. Brilliant, thanks so much for having me, Paul. Pleasure is all mine, and everyone, I will speak to you next week. Have a good weekend. [Music]
