Site productivity and labour

Contractor respondent’s view of site productivity worsened again in our latest survey, with just under half saying that present site productivity on their projects is in the 81–100% range as a proportion of pre-pandemic level, down from approximately 57% in our Winter 2022/23 Report.

S&P Global CIPS UK Construction PMI data for March, published in April, found the fastest improvement in supplier’s delivery times for over 13 years. The release noted an improved supply and demand balance, boosting the availability of construction products and materials.

However, the study also found that input prices continued to rise sharply in March, with suppliers reportedly attributing this to elevated energy costs and increasing staff wages. There was an uptick in staff recruitment, although some noted high wage pressures and shortages of available candidates acted as hiring constraints.

Issues with labour supply in the first quarter of 2023 were slightly lower than our last survey at 58%, down from 65%.

Contractor respondents reporting rises in labour rates at the beginning of 2023 (1Q 2023) were similar to our Winter 2022/23 survey results looking at 4Q 2022. The cost of living crisis, driven by high inflation, continues to have an impact.

It remains challenging to source particular trades, with most survey respondents mentioning groundworkers, bricklayers, steel fixers, cladding fixers and mechanical and electrical installers. There was also indication of movement in the consultant market with the availability of qualified resource an issue.

Some feedback from the survey was the payment of elevated rates for some trades due to the pressures. Others reported that in some regions, such as the Midlands, competition in the market for experienced, skilled personnel is fierce, increasing employee remuneration for retention and onboarding.

There were also reports that contractors were declining tenders due to skills shortages.

The market remains volatile, however. Building Magazine recently reported that Sir Robert McAlpine is restructuring to focus on sectors rather than regions, cutting around 60 jobs.

Whilst ONS data shows that construction vacancies have reduced to 41,000 in January–March 2023 from 48,000 in September–November 2022, they remain elevated compared to historical levels.

Skills shortages and a declining construction workforce are familiar issues, threatening our ability to deliver targets for housebuilding, the transition to net zero carbon and infrastructure.

The latest Construction Skills Network report from the CITB found that despite the economic uncertainty, construction will remain a sector with labour requirements as almost 225,000 additional workers will be needed to meet UK demand by 2027.

Training and attracting new talent to the industry remain in focus. Whilst there is progress, the government has become so concerned about the situation, it has taken the unprecedented step of accepting recommendations from the Migration Advisory Committee for five construction occupations, including bricklayers and plasterers, to be added to the “shortage occupation list” by the summer, enabling them to apply for a skilled worker visa to work in the UK.

The majority of our survey respondents, 85%, felt that the move to add construction roles to the shortage occupation list would help to overcome the labour challenges the industry faced. However, only 35% believe it is sufficient to solve the problem overall.

Feedback from some who completed our survey was that the move was little more than a sticking plaster and training and development, along with a long-term strategy, are needed to create a sustainable industry. Some respondents were concerned that the incentive to invest and train is reduced or removed by non-domestic labour returning to the workforce from the EU and further afield.

Due to the current economic situation and cost of living crisis, some raised whether working in the UK is attractive for European and other workers. There was also consideration that rebuilding efforts in Turkey and Ukraine may further influence the situation.

Industry bodies have called for further additions to the list. In line with advice from the Migration Advisory Committee, other roles, including steel erectors, scaffolders and plant operators, are not added. This is an interim position scheduled for review later in the year.

For steel erectors, projected pay growth is high enough for most jobs to meet the general threshold. Thus, adding it to the shortage occupation list may risk undercutting pay.

Given the high levels of self-employment in the industry, SMEs who may not be familiar with the sponsorship process or have sufficient resources to follow the process, as well as the industry not using the skilled worker route for employing migrant labour much to date, has caused some to question the model's effectiveness.

However, the Migration Advisory Committee said, “This suggests that placing these occupations on the SOL is unlikely to lead to a very substantial rise in visa applications, at least in the short run.” It said that it would not consider low uptake a failure of the policy “but more a reflection of the fact that recruiting foreign workers may not be an effective solution for many employers. However, that does not prevent it being an effective solution for other employers.”