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Tue December 10 2019

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Who needs a 'builders licence'?

28 Nov An industry taskforce is developing a builders’ licensing scheme to solve myriad industry problems. Phil Bishop is not persuaded

Right now, I’m having my front garden steps rebuilt by a local builder called Mark. He came highly recommended by mutual friends and is doing a splendid job, returning Kentish ragstone steps that have been concreted over for years to their former glory. 

Naturally, he is self-employed and not lucky enough to earn the kind of money needed for VAT registration. Or maybe he just chooses to stay below that £85,000 a year threshold – none of my business – but I do know that he is automatically 20% cheaper than any limited company would be. And his quality is more than adequate.

However, there are forces at work across the construction industry that want Parliament to bring in legislation that would curb this jobbing builder’s freedom to trade. They want all builders to be forced by law to apply for a licence to trade; they would have to have their work inspected to make sure they are competent and they would have to re-apply every three to five years. And they would have to pay for the privilege too.

Those behind the idea propose that a licence would be required by any construction business, including sole traders, but not individual employees. 

Unlike a driving licence, a building licence would have to be renewed every three to five years, with fees ranging from £150 to £1,000 depending on the size of the business. One can only imagine the bureaucracy involved.

The driving force behind this plan comes from a school of thinking that holds that the industry is being ruined by rogue builders. A licensing scheme, it is suggested, would get rid of chancers, wide-boys and rip-off merchants once and for all. It would professionalise the industry and drive up standards. It would even generate more work – the reasoning being that fear of employing dodgy builders is suppressing consumer demand.

But the real villains of the construction industry, in the public’s eye, are not the rogue builders at the bottom of the food chain – the ones that licensing seeks to drive out – but the ones at the top. 

It’s those responsible for fire breaking out at a London tower block fitted with a cut-price cladding system and killing 76 residents. It’s those behind the near-miss of brickwork collapsing from a new-build Edinburgh primary school. Or those flogging houses to new home buyers and leaving them with scores of defects. 

This is where the real harm is being done to the image of the construction industry. It’s not the likes of local builder Mark and the hundreds of thousands of straightforward individuals like him. Quite simply, the licensing scheme is shooting at the wrong target.

A coalition of construction and consumer organisations have set up the Construction Licensing Task Force to work out the practicalities of how a licensing scheme for builders might work. It is not yet clear whether it will be enforced by law, or will be just another industry badge scheme.

The initiative comes on the back of a report commissioned by the Federation of Master Builders (FMB), Licence to build: A pathway to licensing UK construction, published in July 2018, which set out how the scheme could work. It recognised that the proliferation of kitemarks and badge schemes has only created confusion in the marketplace and that some of these schemes are not much more than a marketing racket.

According to FMB’s research, 77% of its members support a licensing scheme to drive weaker and less competent traders out of business. It says that 78% of consumers also want to see a licensing scheme for construction introduced (although the question was presumably framed to elicit that sort of response – one can imagine a different response if consumers were asked if they were keen to pay 20% more for their building work, even just to get a cat-flap fitted.)

In the FMB’s report, the members surveyed emphasise that licensing would help to tackle those firms who undercut them by taking cash-in-hand payments, using sub-standard materials, potentially lacking proper insurance, and avoiding other necessary overheads such as mandatory pension contributions.

Members also report being called out to fix poor workmanship undertaken by these outfits. They argue strongly that a licence would offer a range of benefits – firstly by creating a level playing field in the competition for work, and secondly by evidencing a shared commitment to competence and health and safety standards. They also feel that licensing would help to boost customers’ confidence and trust in the professionalism of builders. 

Some members argue that there is no reason why the construction industry should not align itself with the regulatory requirements covering gas and electrical work. Furthermore, respondents who have worked overseas believe that the licensing schemes they have experienced in other countries, such as Australia and New Zealand, work very well. 

Among the minority of FMB members disagreeing with the licensing proposal, the main perceived barriers are the administrative and cost burdens, especially for smaller firms, including sole traders and start-ups. Among members sitting on the fence, the question is raised as to who would ‘police’ the licensing scheme and how enforcement would work in practice.

Almost three quarters of the FMB members surveyed (74%) believe that licensing should extend to ‘self-employed tradespeople’. 

FMB chief executive Brian Berry says: “The vast majority of builders and homeowners want to see the construction industry professionalised. It’s unacceptable that more than half of consumers have had a negative experience with their builder. 

“However, we shouldn’t be surprised by this given that in the UK it is perfectly legal for anyone to set up a building firm and start selling their services without any prior experience or qualifications. This cannot be right given the nature of the work and the potential health and safety risks when something goes wrong. 

Berry continued: “In countries like Australia and Germany, building firms require a licence and we want to develop a scheme that regulates our industry in a similar manner. I am delighted to be part of the construction licensing task force and will ensure that any such scheme works for small building firms.”

The FMB’s report was produced by a firm of consultants called Pye Tait. Here is a direct quote that is worth further analysis: “Ensuring health and safety is already an extremely serious focus for the industry. Indeed, the findings from the Hackitt Review point to the importance of improving the current regulatory framework to ensure that a tragedy like Grenfell Tower never happens again.”

But the issue of Grenfell Tower was not ‘health & safety’ as we understand the term. No construction workers were reported to have been injured putting up that flammable cladding. The issues were cheapskatery and self-certification – the approval of a cladding system that should never have been approved. A licence to build would have had no impact.

Grenfell Tower shows why licensing is a dumb idea not a good idea, and it exposes the ‘cowboys’ myth. They are everywhere, folks!

Lack of effective supervision and regulation were also behind a system failure that could have been as appalling as the Grenfell Tower fire. Brickwork collapsed at Oxgangs Primary School during a storm in January 2016. It was just luck that the building and playground were empty at the time.

The school was built in 2005 by a top-line contractor, Miller Construction, under a public-private partnership initiative. Four other schools built by Miller at the same time were subsequently closed for precautionary inspections.

There is no evidence to suggest that a licensing scheme would reduce construction’s accident rate. Dozens of construction firms have been prosecuted this year for safety offences causing deaths and injuries on their sites, including Balfour Beatty, BAM, Bowmer & Kirkland and Clancy Docwra. Would a building licence have made any of their sites any safer? Would anyone take their licences away?

The FMB has corralled supporters of the idea into forming the Construction Licensing Task Force, meeting every three months with the aim of producing a further report by summer 2021 for the government to consult on.

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The first meeting was held in London on 8th August 2019. Liz Peace, former chief executive of the British Property Federation, was elected chair.

The 21 people in attendance at the first meeting were mostly trade association functionaries. There were five from the FMB, plus employees of the Association of Consultancy & Engineering, the Chartered Institute of Building, the Electrical Contractors’ Association, the Royal Institution of Chartered Surveyors and Local Authority Building Control. 

There were also a couple of civil servants, one from the Ministry for Housing, Communities & Local Government and another from the Department for Business, Energy & Industrial Strategy. But no actual builders were there; no-one whose life and livelihood is actually going to be affected.

The Task Force agreed to establish two sub-groups that will develop a proposal for (a) the scope of the licence and (b) the standards and competency criteria for licence holders. These proposals will then be debated by the Task Force at its next meeting on 13th November. The sub-groups will also discuss what additional research may be needed to support their work.

Task Force chair Liz Peace says: “Mandatory licensing has the potential to transform our industry into a world-leading sector. Licensing will help drive up standards and help address the issue of quality and professionalism which, in some areas, is falling short. At the heart of what we’re trying to do is increase protection for the ordinary person who engages with the construction sector. 

“Indeed, according to research by the FMB, one third of homeowners are so worried about having a bad experience with their builder, they are putting off commissioning construction work altogether. This could be costing the economy as much as £10bn per year. Enough is enough and the industry itself recognises that,” says Peace.

She continues: “Licensing has support in principle from more than 30 construction organisations and consumer groups. The task force will be supported by major players and in an industry that is often criticised for being too fractured and disparate, I am heartened by the fact that the sector is coming together to lead the industry in a new direction.”

There is one significant industry association that has come out firmly against the whole idea – the National Federation of Builders (NFB). It points out that construction is already one of the most regulated sectors, not only through contractual obligations scrutinised by clients, but also planning, building, trading standards, health & safety, environmental and financial regulations. 

A compulsory scheme would require a form of enforcement, which would be complex and costly, the NFB says. 

A better place to start would be to make existing structures and mechanisms more effective, rather than superimposing a new regime. If certain quarters of the construction industry really think more regulation is required, they should stump up to provide adequate financial support for the cash-strapped regulatory authorities that already exist, such as local trading standards and the Health & Safety Executive. These are the appropriate organisations to police honesty and competence.

There is also scope for an enhanced role for the insurance industry. How the hell did the insurers of Rydon, Arconic and other central actors in the Grenfell Tower refurbishment allow underwriters to become so exposed?

It is right that trade associations themselves also take a lead role in consumer protection – offering quality and price guarantees for work conducted by their members. They would doubtless argue that by creating a licensing scheme they are protecting consumers, but they are reaching beyond their own membership to impose on those that have no inclination to join their club. They are not just creating a licensing scheme for approved builders – they are effectively simultaneously creating an outlaw scheme, banning the free traders.

We already have a licencing scheme for individual builders. It is called the Construction Skills Competence Scheme. Unlike the proposed new scheme, it applies to individual workers, not trading entities, and it is voluntary. It therefore has an impact only on the business-to-business side of the market, where it is a prerequisite for working on major construction sites. It has no locus in the domestic household consumption of construction that apparently needs a new level of protection.

In general, the thousands of sole traders who work in the local domestic sector (like Mark who is doing my steps) don’t have CSCS cards and don’t work on the big construction sites – not through lack of competence but through choice. It looks like CSCS, or something very similar, might be heading their way.

Competence in what, though? Will a licence to build be all-encompassing, enabling a sole trader to dig foundations, lay bricks, put in pipework and tile the roof? Or will the licence be craft-specific?

But even if a builder jumps through the hoops of demonstrating their competence every three to five years, that does not prevent them from also being a ‘rogue trader’. A competent builder is not necessarily an honest builder; a competent builder can still persuade your granny that her perfectly-good roof needs replacing.

And what will it take to lose a licence? Where, on the scale from a misaligned brick to a corporate manslaughter conviction, are we to draw the line? Rogue traders are for local trading standards officers to deal with, not Capita, or some other paper-pushing desk-johnnies.

No doubt arguments for and against building licences will knock around for many years to come but it is hard to imagine such a dumb idea will ever get through Parliament… unless, perhaps, they put it to a referendum.

"Do you have a licence for that weapon, sir?"
"Do you have a licence for that weapon, sir?"

Construction licensing - who and what would be covered

The FMB report says: “The licence should apply to all legal entities of construction firm (incorporated and unincorporated, including sole traders) rather than individuals.”

It says: “It is proposed that the licence covers any construction work undertaken by a contractor on a paid-for basis. This would exclude DIY activities that a home owner may want to undertake themselves or ask a family member or friend to do, which would be at their own risk. 

“Consideration would also need to be given to low-risk activities and how they are dealt with in relation to the licence, for example paid-for handyman services that might include simple tasks such as changing washers on a tap or nailing up picture frames in a home or office. 

“Definitions of licensable construction activity would need to be developed to ensure clarity. These should draw on existing frameworks and definitions such as those used in the Construction (Design and Management) Regulations. 

“Implementing a minimum ‘value of work’ threshold for construction work to be licensable would be too complex to administer. This is because a contractor might carry out different types and sizes of project and a firm could try to evade the scheme, for example by splitting work into smaller elements, each of which falls below the threshold. In addition, the setting of values ignores the fact that even low value work could be life-threatening or lead to significant additional problems beyond the original work itself.”

For further details and to track progress of the licensing campaign, see https://licenceukconstruction.co.uk

This article was first published in the November 2019 issue of The Construction Index magazine 

UK readers can have their own copy of the magazine, in real paper, posted through their letterbox each month by taking out an annual subscription for just £50 a year. Click for details.

Got a story? Email news@theconstructionindex.co.uk

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