UK Construction Market Report 1Q 2023
Site productivity and labour
Contractor respondent’s view of site productivity worsened in our latest survey. Just under 60% of contractors said that present site productivity on their projects is in the 81–100% range as a proportion of pre-pandemic level, down from approximately 75% in our previous report.
The latest Construction Product Availability Statement from the Construction Leadership Council (CLC) outlines that the new year has started similarly to how the last one finished, “with product availability continuing to improve for almost all products and in all regions.” The CLC explains that this is partly due to a reduced activity level as a result of poor weather and a delayed return to sites after the Christmas break, which would also impact productivity.
Issues seen in 2022 with products using semiconductors continue, predominantly gas boilers and M&E products, due to global supply chain pressures. The CLC also reports that bricks, blocks and roof tiles remain on allocation in some regions. However, generally, deliveries are being managed to avoid shortages.
Issues with labour supply in the fourth quarter of 2022 were similar to the previous quarter, with 65% of contractors reporting issues, up from 60% — but much reduced when compared to nearly 90% in our Summer Report looking at the second quarter.
It remains challenging to source particular trades, with most mentions from our survey respondents for bricklayers, steel fixers, cladding fixers and mechanical and electrical installers.
Contractor respondents reporting increases in labour rates in the fourth quarter of 2022 were up to nearly 90% from 76% in our Autumn Report. The cost of living crisis, driven by high inflation, continues to have an impact.
Anecdotal evidence received suggested that some parts of the supply chain are planning to reduce staff numbers to balance uncertain demand and elevated costs.
The January release of the S&P Global/CIPS UK Construction Purchasing Managers’ Index Total Activity Index reported the first fall in employment since January 2021, with respondents reporting that reduced activity meant vacancies were often not filled.
However, ONS data shows that construction vacancies reduced to 45,000 in October–December 2022 from a high of 51,000 in August–October 2022; they remain elevated compared to historical levels.
Data released in December 2022 by the ONS also shows that construction workforce jobs reduced by 39,000 between June and September 2022. Concerningly, the data shows that numbers in the industry have dropped significantly since the financial crisis.
Whilst labour and skills shortages are long-term issues, Brexit and an ageing workforce add further pressure.
Measures such as implementing flexible working practices, optimising designs for modern methods of construction (MMC), embracing data and insights and utilising robotics are crucial to improving productivity and outcomes.
Increasing digitalisation of the industry will help to change perceptions and attract new entrants. A potential opportunity for the construction industry is the downturn in the technology market with large companies such as Microsoft and Twitter making redundancies, meaning that there are highly skilled people looking for new opportunities.
However, there are concerns that the economic challenges facing businesses will impact investment levels.
Six in ten of our survey respondents said they are concerned that the economic conditions will impact the drive for greater diversity in the construction industry, potentially impacting recruitment levels and marketing spending.
With a strong pipeline of work to achieve net zero carbon targets, for defence and to meet energy security/affordability aspirations, labour will remain a vital issue for the construction industry.
Government commitment to pipelines will ensure the security of the construction industry workforce. The Autumn Statement capital spending commitment of £600 billion over the next five years for schemes including HS2, Northern Powerhouse Rail, East West Rail and the New Hospitals Programme will require vast levels of resources, particularly labour.
