Construction output grew despite recruitment difficulties

Results of the third Build UK State of Trade survey for 2017 showed that construction output grew and that contractors anticipate continued growth in workload during the current quarter and over the next 12 months.

The survey, which was undertaken with Glenigan, found that 20% of contractors expected workloads to rise in 2017 Q4, and 13% of firms expect output to rise over the next 12 months. This is a positive outlook, despite a dip in new enquiries during the quarter, suggesting that firms have strong existing order books.

Overall, labour availability remains a concern with 8% of contractors reporting that the recruitment of skilled labour had been more difficult than during the previous three months. In addition, the number of trades and professions where contractors reported widespread recruitment difficulties doubled with the recruitment of bricklayers, cladders, construction / site managers, mechanic / fitters, scaffolders, surveyors, site supervisors, and construction project managers among the most problematic.

Where contractors had experienced difficulties in recruiting staff, firms cited lack of skills as being an issue in 60% of cases, with lack of experience and required qualifications cited as factors in 64% and 50% of cases respectively. Recruitment difficulties are also impacting upon labour costs, with a balance of 33% of firms reporting that their labour costs had risen during the quarter, and 67% reporting that they were higher than a year ago.

Labour availability issues have impacted on contractors’ business performance, with 20% saying that labour shortages had resulted in the late completion of work, and a third saying that it had prevented them bidding for work.

In addition, firms have seen widespread increases in material costs. Fifty-eight per cent of firms reported higher material costs during the third quarter of 2017. Rising labour and material costs have increased overall building costs, with 42% of firms reporting an overall increase in costs. Tender prices rose slightly from the previous quarter, with just 8% of firms reporting a rise in tender prices during the quarter. Overall, profit margins were unchanged on the previous quarter, but 9% of firms reported that they were up on a year ago.

When it comes to payment, 33% of contractors reported that the average wait was for 46 days or more.

Suzannah Nichol, chief executive officer of Build UK, said: “The latest State of Trade result highlights the industry’s continued growth, contrary to Office of National Statistic’s (ONS) statistics, with both contractors and specialist contractors reporting a rise in output during Q3. However, a lack of required skills remains a concern, with labour availability issues continuing to impact on contractors’ business performance. Build UK believes industry needs to recruit, train and retain a skilled workforce, and we are working with members, government and other key stakeholders to ensure that this remains a key priority.”