In this article ALA Quantity Surveyor Ryan Grey considers the problem of construction labour supply shortages.
The fact that the UK is experiencing labour shortages has been a prominent topic in recent months. Haulage drivers are particularly in short supply. This was a major factor in the recent fuel shortages and has led to concerns about delivery times in the lead up to Christmas. The labour shortage in construction in particular is a major concern.
A selection of headlines from The Guardian newspaper in recent months read:
- Staff and materials shortages slow growth in UK Construction
- Supply shortages hit Britain’s booming building industry
- UK employers struggle with the worst labour shortage since 1997.
The RICS has carried out further research into this topic by in its most recent ‘RICS UK Construction and Infrastructure Monitor’[1]. This shows that what is happening in the news with the supply of haulage drivers becoming scarcer is expected to be replicated across the UK construction industry for labour in general.
The survey also uncovered that whilst workloads are expected to increase (possibly because of the bounce back from the pandemic), the price of materials is also expected to increase. This will be covered in Part Two of this series.
This article focuses on the causes of the labour shortage and proposes some short-, medium- and long-term remedies.
What caused the labour shortage?
Whilst there a no doubt several factors, this article will briefly explore what are deemed to be the three biggest contributing factors to the UK construction labour shortage.
-
An ageing workforce coupled with a lack of interest from the younger generation in UK construction roles.
Every industry will experience an ageing workforce but what’s important is how that industry replaces its retirees.
Whilst most will agree there are many positives to working in the construction industry, what is not helping the cause is the poor perceptions that the construction industry just cannot seem to shake off.
‘The Construction Report 2025’ (2013)[2] and the ‘Construction 2030 and Beyond Report (2015)[3] found that some of the reasons that are discouraging many from joining the sector include the perceived poor image, low pay, low job security and the lack of a skilled profession after completing time within the industry.
Quite often teachers and parents are also a source of blame; a career in construction is often not promoted in the same way as other more ‘glamorous’ or popular career choices.
-
The Covid-19 Pandemic
The pandemic’s effect on the construction labour shortage is very simple. Prior to the commencement of the furlough scheme the start of lockdown meant no more working on sites, and for many site-based workers this meant no more working whilst lockdown was enforced. The furlough scheme brought some relief, but in most cases, employees were paid 80% of their normal salaries; and self-employed workers were forced to wait longer to receive any payment.
The result of this led to many opting to retrain and find employment in different industries. Upon the reopening construction sites, many of the previous workforce were no longer available.
-
Shortage of EU Nationals
Undoubtedly the biggest contributing factor towards the UK construction labour shortage is a reduction in EU labour. Many commentators link this to the UK being a less attractive place for EU nationals following Brexit.
According to an ONS report[4] , in 2020 there were 2.1 million people employed by the UK construction industry, a decrease of 50,000 workers. The ONS offered no explanation for this decrease.
A further report from construction news[5] suggested that 127,000 of these workers were from the EU, down by 50,000 compared to the same quarter from the previous year.
From these reports, it appears reasonable to conclude that the majority of staff shortages are due to the decrease in EU nationals.
A Migration and Construction report[6], published by the Construction Industry Training Board (CITB) suggests that UK recruitment agencies believe that the UK’s new, point-based immigration system will lead to a 40% decrease in the number of skilled construction workers coming to the UK.
All the above have combined to leave a huge skills shortage across the UK construction industry.
A rise in Labour Costs?
The labour shortage will then migrate to a rise in labour costs. Randstad[7] claims that construction workers are likely to be paid 14% more than in previous years.
Companies must now work harder to attract the most suitable employees. This usually means that the firms who can provide the best overall employee package will usually win. A higher cost of recruitment (in terms of salaries and benefits packages) put further pressure on tight margins, but this is an uncomfortable truth in an employees’ market.
Temporary staff may be a short-term solution. But in a competitive market, temps can be hard to come by, and are often unreliable. ALA can provide short-term commercial and planning staff on day rates, but unfortunately, we cannot provide labourers, skilled trades , foremen etc.
Established companies with large, employed workforces should be in the best position. Those who weathered the storm of Covid and managed to retain staff are in an enviable position. Even these companies must be wary of staff retention as heads may be turned by high rates offered elsewhere.
Although there is not an overnight fix to this issue, we set out below some thoughts on actions which may help.
Immediate Action
The very first thing to do is consider if your contract contains fluctuation provisions to account for unexpected price rises. Some contracts do, although these terms are often overlooked by parties and dismissed as standard ‘boilerplate’ wording rather than used properly. Further they usually apply to materials rather than labour.
Even if your contract contains a standard fluctuation provision, it may be worth evaluating if this provision is actually fit for purpose. For example, the NEC4 fluctuation provisions in Secondary Clause X1 are index linked or linked to the Retail Price Index. Neither is suitable for dealing with short term, dramatic fluctuations to the cost of labour or materials.
If the contract offers no help, it is essential to ensure that your projects are being commercially managed robustly. This includes ensuring that applications are raised on time, compensation events and variations are raised accurately and on time whilst trying to minimise costs wasted unnecessarily elsewhere. If you need help with this or if you would like your project account auditing to ensure you are claiming all proper entitlement, please get in touch. This is an area where our team can help.
Medium Term Action
Parties are now more live to the issues of labour and materials shortages. These problems are not going to disappear, and any contract not yet entered into presents an opportunity to deal with the issues up front. If possible, a proper apportionment of risk and sensible fluctuation provisions should be agreed. This will need to be agreed, negotiated, and priced just like any contract term.
If you are concerned about any contract you are considering entering into, contact us. Our experts at ALA offer a ‘Commercial Risk Review’ service to assess the commercial implications of key contract terms, and would be happy to help.
The long-term solution
The UK construction industry needs to do more to dispel the myths spoken about above. This is vitally important to attracting the younger generation into construction again. Teachers, parents and students all need to see the benefits.
Attempts to attract the next generation need to focus on the positives that can be taken from construction.
The opportunities within construction are varied whilst offering clear promotion opportunities for those who want it. Construction projects within the public sector are often those that will make a real difference to the local community, whilst the skills learnt are often transferrable to everyday life.
The construction industry is also embracing BIM (Business Information Modelling) and other innovative practices. For the younger generation already fully submerged in a digital world, this may prove enticing.
Companies are already making good use of the apprenticeship schemes, but more needs to be done to promote the benefits of these schemes to schools, teachers, parents, and students.
Playing Our Part
With the above in mind, ALA launched our degree apprenticeship scheme in 2019. This was launched with the key aim of addressing the skills gap in the commercial sector. It has already been a huge success. We currently have three apprentices in their first, second and third year.
Upon completing the scheme, all our apprentices will have a degree in Quantity Surveying and MRICS chartership, as well as years of practical on-site experience.
Our very first apprentice, Dan Ashton joined in September 2019. Since then, he has been working for ALA whilst also studying for BSc in Quantity Surveying. Dan has worked with several clients to broaden his experience, including working overseas on location in Denmark.
More recently Matthew Leather joined the ALA apprentice scheme, already working on several projects whilst seeking guidance on his development.
As earlier stated, there is no quick fix to the UK construction labour shortage, but here at ALA we are committed to ensuring we try to plug the gap.
If you are affected by the issues in this article and would like to find out more and what services ALA can offer, please contact Tom Lamb or Byron Tyson.
Alternatively you are interested in joining the ALA apprentice scheme, please contact Karen Turlay-Rose.
[2] Construction-2025-strategy.
[4] See ONS Construction Statistics 2020 for details.
[5] ‘UK Construction Loses a Quarter of its EU Born Workforce’, Construction News, 22 January 2021.
[6] CITB Report: MIGRATION AND CONSTRUCTION: The view from employers, recruiters and non–UK born workers in 2019.
[7] Labour Shortage Due to High Demand Not Brexit, Construction News 28 September 2021.