Are wage rises threatening the growth of the construction sector?

money-skills-300x187Concerns have been raised for the potential impact that increasing wages could have on the growth of the construction sector.

Recent data from the Royal Institution of Chartered Surveyors (RICS) and UK Jobsite CV-Library has revealed that the ongoing skills crisis is the root cause for the rise in salaries in the construction sector.

The RICS UK Construction Market Survey, Q4 2015, recorded that 61% of construction professionals reported a hike in wages alongside a 6% rise in the average salary for construction workers.

According to CV-Library, the average salary for those in the construction sector – for example construction manager or building technician – rose from £40,496 in 2015 to £44,628 in 2016 compared to other sectors such as hospitality and legal that saw mere 2.6% and 3% increases respectively.

While these figures come as great news for those with secured contracts in the industry, they come alongside reports that 66% of construction professionals pointed to labour shortages as a significant barrier to growth in the last quarter of 2015.

Some in the sector feel that the increase in wages could have a positive impact on the skills shortage, providing the much-needed workforce to support the growth of the industry and fulfill Government plans to tackle the housing crisis with 400,000 new homes by 2020.

Simon Rubinsohn, chief economist for the RICS, commented: “Industry wages are becoming increasingly attractive, and I would hope that over time this will encourage skilled workers to return to the sector, as well as drawing school leavers and graduates towards construction industry careers.”

However, there are concerns for the impact that a wage increase may have when combined with other factors affecting the industry.

Speaking exclusively to Roofzine, Brian Berry, chief executive for the Federation of Master Builders (FMB), commented: “The prolonged economic downturn that we experienced in the wake of the financial crisis gutted the industry’s skills base, causing as many as 400,000 tradespeople to leave the sector for good. Compounding this talent drain was a bottoming out of apprenticeship numbers, meaning that skilled workers weren’t being replaced. When you lose that much ability you create the perfect conditions for a skills shortage once activity rebounds.”

Thus, while the increase in wages does reflect the strong economic growth that the sector has seen in recent years and provide a much-needed boost of confidence for the industry, as Mr Berry continued: “We must remain mindful of the fact that this nascent recovery is threatened if there aren’t enough tradespeople to build out the projects that are in such high demand.

“Rocketing wages will push up the costs of contracts, sometimes to the point of non-viability, and this could have dire consequences for construction growth.”

Have your say! Do you think that an increase in wages is a good thing, potentially encouraging young people to pursue a career in construction? Or will it eventually have a negative impact on profit margins and therefore curb the current growth of the sector?
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