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Construction tender prices set to rise in face of long-term skills shortages

The UK construction market is continuing to tread water, with further delays to Brexit making a post-deal ‘bounce’ now increasingly unlikely. Ongoing questions around political leadership and a potential election are affecting investment decisions, with business planning impacted by uncertainty and expected to extend well into the last quarter of the year. Many clients are opting to take a ‘wait-and-see’ approach and sit-out the current political turmoil.

Simon Rawlinson

Head Of Strategic Research and Insight +44 (0)20 7812 2319 Ask me a question
Construction Market View 2019

“Post-Brexit migration restrictions could prompt a real skills crisis. The supply chain must look at other options for increasing productivity.”

The skills crisis

Despite increased levels of uncertainty, Brexit appears to have been the trigger for further employment growth across the UK economy, with businesses preferring to hire people rather than invest in plant and equipment to deliver long-term productivity gains.  

As a result of skills shortages, earnings growth for construction employees has averaged 4.2% over the past year, up from 2.1% in 2017. Earnings inflation for the self-employed, who make up 41% of the entire construction workforce, could be higher still.  Overall in the UK, nearly 100,000 jobs were created in the three months to March 2019. 

Yet given  growing concern as to whether EU migrants will continue to want to work in the UK, combined with the accelerated retirement of older workers from 2024 onwards, labour pressures are expected to intensify. An anticipation of tighter labour markets from 2022-23 means construction input costs are predicted to rise by 1% per annum, reaching 4% by 2022.  

The supply chain will need to look at other options for increasing productivity. Off-site manufacturing currently delivers around 8% of industry output, but with the introduction of a government mandate, this could increase significantly. Adopting new technologies to improve processes will help to eliminate waste and duplication, while a renewed focus on training and re-training – particularly with the introduction of T-levels in 2020 – will further help to support a much-needed flow of talent.

Download our full Spring Market View below to find out more. 
 

Questions about this article

Simon Rawlinson

Head Of Strategic Research and Insight +44 (0)20 7812 2319 Ask me a question

Arcadis White paper

UK Construction Market View

Treading Water