How big is the personnel shortfall in the construction industry?
Is there a problem and if so, how big is it? (Prospect's housing report is kindly sponsored by RICS, Sovereign Housing, Atkins and the Building Societies Association)
Construction plays a key role in UK plc. The sector directly generates around 8 per cent of GDP and employs 9.5 per cent of the working population. The physical assets produced by design and construction businesses not only drive over 35 per cent of national wealth but also contribute to our quality of life by providing homes and social infrastructure.
Clearly it is important that we have a plentiful supply of skilled labour, because when skills are in short supply, not only can projects be delayed, but prices go up and quality levels become harder to sustain. This is a recurrent story for the UK construction sector. Readers who have recently had work done on their homes may well have been exposed to these problems.
Is there a problem and if so, how big is it? Counter-intuitively, at the moment many construction businesses are shedding staff, even as activity levels continue to increase. As a result of delayed projects, many construction businesses are not replacing their voluntary leavers, and as a result, the workforce has shrunk by about 100,000 in the past year. This points to a real problem of boom and bust in the sector, which undermines the industry’s ability both to offer secure careers and to invest in the future.
What we do know is that construction output is likely to grow. Current Construction Industry Training Board (CITB) forecasts suggest that 168,000 jobs will be created through growth in the sector between now and 2024. However, the main political parties have all promised to invest even more in homes and improved infrastructure, which will in turn create an even greater demand for new jobs. A future skills squeeze could be triggered by the expansion of a specific sector such as housing or rail, by above-trend rate of growth in the Midlands or North, or by a completely new source of demand such as the decarbonisation of existing housing.
Three areas that generate a lot of concern within the sector are: the ageing workforce; the UK’s dependence on migrant labour; and the success of the sector in attracting young people. Census data from 2011 highlighted that one in five UK-born construction operatives were aged over 55—this highlights the risk of a wave of retirements from the industry. Similarly ONS data shows that 10-12 per of construction operatives originate from outside of the UK. Many of these have chosen to work in the UK’s hottest markets—London and the south-east—and more recently Manchester and Birmingham. The ability of UK contractors to access overseas labour has obscured the critical fact that the UK is not replacing its domestic construction labour fast enough to deal with the combined effects of growth, retirement and loss of access to overseas labour pools. The sector currently takes on about 22,000 apprentices a year, which is far behind the annual replacement rate forecast by the CITB for the period 2019 to 2024.
So how can construction attract a growing workforce? Unemployment is at a 40-year low, access to overseas labour may be restricted in future and there is plenty of evidence that the construction sector finds it hard to recruit new domestic entrants. This is not because of the level of earnings, but because of the wider brand and reputation of the industry.
Construction needs to make itself attractive to women and ethnic minorities and it needs to make more productive use of its labour, by for example, transferring more work from site to the factory, and by increasing the adoption of labour-saving technologies on site.
None of this is easy. If it were, the sector would have sorted out its workforce issues long ago. The solution relies on increasing investment in improving working conditions and raising productivity, which in turn relies on predictable, profitable growth. However, most large UK construction firms have struggled to deliver profits of more than 2 per cent of turnover, which leaves little scope for bets on innovation.
The promised growth in UK investment in social and economic infrastructure could become a game changer for the sector if the programmes are predictable and investable. Future opportunities must be aligned to delivery, using methods such as off-site manufacturing that generate attractive, productive jobs.
Doing more of what we do today will not be sustainable. While there is no guarantee that people can be attracted to the sector, there can be no argument that the creation, maintenance and decarbonisation of the UK’s infrastructure is anything other than a genuinely worthwhile vocation. Harnessing this energy will be a key to minimising future skills shortfalls.
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