Skills shortages in the SW biting construction sector


Skills shortages impacting the industry once more - 64% now citing this as impacting growth

Workloads in the South West’s Construction and Infrastructure continued to rise in Q3 2017, according to the latest RICS Construction and Infrastructure Market Survey, with 25% more respondents seeing a rise in workloads of the quarter, with a steady pace of growth.  However, while activity in the South West remains steady, comments left by respondents continue to highlight Brexit-related uncertainties as weighing on investment decisions and the lack of sufficiently skilled workers also remains an obstacle for many businesses.

Having eased throughout 2016, the intensification of labour shortages is biting once more with contributors citing this as an impediment to growth. Respondents to our survey are still seeing a lack of quantity surveyors (71%) as well as other professionals (51%) across the region. 44% are also seeing a shortage of workers with specific trades, all hampering growth. 

Despite government efforts to bolster the workforce and the prominence of apprentices, through an apprenticeship levy introduced earlier this spring, only 42% of respondents feel that government-funded programmes are moderately effective, with one-third unsure. The quality of the talent pipeline is insufficient as well – less than half (45%) of employers who currently hire apprentices view them as a long-term solution to their hiring needs.

Breaking the rise in South West’s workloads and activity down to sector level, the most growth is being seen in the private housing sector, while remaining broadly stable elsewhere. Meanwhile, the public non-housing sector continues to underperform all others.  In infrastructure, 22% more contributors reported a rise rather than a fall in workloads. Across the region, respondents expect the rail and road sub-sectors to post the most significant increases in construction output over the coming 12 months.

Despite uncertainties, a net balance of 37% of respondents expect activity to continue to rise rather than fall over the next twelve months. Meanwhile, 38% more contributors expect employment to rise rather than fall, an improvement relative to Q2.

While a shortage of workers is hampering activity and profit margins across the South West, data collated on a national level also shows financial constraints are still reported to pose the most significant challenge, although the share of contributors expressing this view has come down to 69% (from 79% in Q2). Access to bank finance and credit remains by far the most frequently cited financial issue, followed by cash flow and liquidity. This likely reflects a more cautious stance by banks given cyclical market conditions and Brexit considerations.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of only +17% of respondents expecting a rise in margins over the coming year. 

Jeffrey Matsu, Senior Economist, commented on the latest RICS survey data:  

“While activity in the sector has moderated, growth and growth expectations remain in positive territory. Uncertainties due to Brexit continue to weigh on companies’ investment and hiring decisions, and banks appear to be adopting a more cautious stance to providing finance. Meanwhile, challenges related to an inadequate supply of skilled labour are as pronounced as ever.”

Commenting on some of the larger projects in the region, like Hinckley Point, Michael Riley of Michael Riley Associates said: “These projects are pushing up prices and, at the same time, causing shortages of professionals and tradesman across the region.”

Share this Post:

More Posts: