Over the last few years there has been increasing concern that a lack of skill within the construction industry is going to have a significant impact on productivity. Often first to feel the effect of a recession and one of the last to benefit from recovery, construction companies are beginning to grow in confidence and dust off projects that have been put on hold for too long. Yet even now, with a positive outlook and big opportunities, companies are questioning if they can attract the people and skills they need in order to break ground.
Since the recession in 2008, there was a huge jump in the number of unemployed people in the UK whose last job had been in construction. In 2009 this peaked at over 250,000, though it’s declined steadily over the last few years. The problem is that many aren’t returning to the industry – they’re moving into other areas, or leaving the country altogether. Because the impact of a recession is felt so severely within construction, it was too risky for many to wait for a recovery, so they simply moved on to other industries.
To maintain a reasonable rate of output during the downturn, companies slashed their margins to avoid equipment and staff being left to stand idle and rust. Projects were run on skeleton crews, paid a stagnant or reduced wage to keep developments profitable and help the rate of redundancy stay as low as possible. Still, many good people were lost, particularly at the high end of the market, and many of them were lost to other industries and can’t easily be replaced.
With hindsight it’s easy to suggest these companies should have capitalised on the cheap cost of labour at the time by investing in apprenticeships that would prepare them for the eventual economic recovery. Instead the number of people completing apprenticeships halved between 2008 and 2013. Companies made the most of the cheap labour at hand – average salaries fell by 20% between 2008 and 2009 – and it was assumed there would be sufficient skill available as and when it was needed.
By March 2014 there were 20,000 construction vacancies in the UK and the CITB predicts an extra 182,000 jobs will be created in the sector by 2019. In June 2015 53% of mid-sized construction companies admitted they were constrained by a lack of available talent and 77% said skills shortages were damaging their ability to manage projects.
Now apprenticeships are being introduced once again, helping to train a new generation of construction professionals that will be able to deliver the development projects of the future. But these skills aren’t taught overnight and there is a significant short-term impact caused by having so many people still learning their trade.
In the last quarter of 2014 productivity per hour had fallen by 8.5% compared to the beginning of 2011 and 5% down per job overall. The ability of teams to work effectively while managing and teaching those new and returning to construction roles takes time and attention. Talent development is vital to the long-term health of any industry, but the short-term effect is that the cost of experience jumps significantly.
Between 2014 and 2015 there was an average 3.6% increase in salary for those working in construction and property: a rate much higher than inflation – which has been fluctuating below 1% – and is amongst the highest of any UK sector.
Though it’s happening slowly, the UK economy has grown for the last 12 successive quarters. Construction isn’t yet as productive as it was before the recession hit in 2008, but this is because of underinvestment in the housing sector – a trend fuelled by ideology as much as economics. Regardless, developers are continuing to seize opportunities wherever they can. While the economy remains strong and there continues to be high demand for those still able to offer their experience to the sector, we will see salaries continue to increase at a much greater pace than inflation.
If the industry is hit by another recession, it will be in a position to weather the storm and emerge better prepared to continue on with the people and skills it needs to thrive.