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Skills shortage is 'suffocating growth'

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Construction’s labour shortage continues to stifle growth with demand for both permanent and temporary workers rising month on month.

The Recruitment & Employment Confederation’s (REC) monthly Report on Jobs indicates still robust growth of demand for staff across the construction industry during October, even though the rate of growth appears to have slowed a little.

Adjusted for seasonal factors, the index for permanent workers in the construction sector fell from 64.7 in September to 62.8 in October. The latest reading was indicative of a sharp, although softer, expansion in permanent vacancies and one that was stronger than the UK-wide trend (62.1).

The equivalent index for temporary workers fell from 56.5 in September to a 21-month low of 55.5. Nonetheless, the latest figure was still consistent with a marked rate of expansion, the REC said. The index for short-term staff in the construction sector remained below the UK economy average (59.7).

A score above 50 indicates that demand for jobs is greater than a month ago; below 50 indicates demand has softened. Construction employment demand has now been growing every month since early 2013.

“These latest figures point to a continuing shortage of labour, both permanent and temporary, in the construction sector,” said Richard Threlfall, head of infrastructure, building and construction at KPMG.

“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 rescoped as a result of price rises caused by material and labour cost inflation.”

His colleague Bernard Brown added: “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.”

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