Construction skills shortage still stifling growth

Demand for both permanent and temporary construction workers is continuing to rise by the month as the industry’s labour shortage hinders growth.

This is the indication from KPMG and the Recruitment & Employment Confederation’s (REC) monthly Report on Jobs, which points to robust growth of staff demand across the industry during October, despite the rate of growth slowing.

Since early 2013, construction employment demand has been growing each month. The scoring works on the rule that above 50 demonstrates demand for jobs being greater than the previous month; whilst below 50 indicates a softening of demand.

With seasonal factors adjusted for, the index for permanent workers in the construction sector fell from 64.7 in September to 62.8 in October. This was slightly stronger than 62.1, the UK-wide trend.

Meanwhile, the equivalent index for temporary workers fell from 56.5 in September to 55.5, remaining lower than the UK economy average of 59.7, and a 21-month low for the industry. The REC pointed out though that the latest figure was still consistent with a marked rate of expansion.

Richard Threlfall, head of infrastructure, building and construction at KPMG said: “These latest figures point to a continuing shortage of labour, both permanent and temporary, in the construction sector. It is clear the industry is suffering from a chronic skills shortage along its entire supply chain, with recruiters struggling to meet demand for roles ranging from architects to construction workers. As a result salaries in the sector are soaring, with the average weekly rise reaching 5.1%, vastly outpacing the private sector average of 3%.

The shortage of construction labour is suffocating the expected growth of the industry. We have seen weaker than expected output in the sector in the last few months, in particular in the commercial sector, and it seems clear this is largely due to projects being delayed and re-scoped as a result of price rises caused by material and labour cost inflation.”

His colleague Bernard Brown said: “While hiring continued at pace across most areas of the economy, the figures point to a worrying development in the construction sector. It is clear the industry is suffering from a chronic skills shortage along its entire supply chain, with recruiters struggling to meet demand for roles ranging from architects to construction workers. As a result salaries in the sector are soaring, with the average weekly rise reaching 5.1%, vastly outpacing the private sector average of 3.4%.

“With Britain in the grips of a housing crisis, this shortage of skilled workers could throw a serious spanner in the works, slowing projects in the pipeline and pushing up overall build costs as developers bid high to secure the labour they need. Businesses will want to see this addressed in the Autumn Statement, with measures to boost apprenticeships and encourage the return of small and medium sized builders, many of whom left the industry in the midst of the recession. By addressing this crucial capacity issue and rebalancing the industry away from the bigger developers, Britain can build the skills base it needs.”