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Employment levels increase but salaries fall

Despite the top 100 contractors recording staff growth of 6 per cent, the skills crisis and falling salaries are growing concerns.

The number of people employed by the top 100 contractors grew significantly this year, according to analysis of CN100 data.

Staff levels at those companies with comparable available data rose by 6 per cent. The total wage bill also increased, but by just 4 per cent, suggesting a drop in average salary across the top 100 firms as a whole.

This fall would appear counter-intuitive at a time when the industry is hiring rapidly and concerned about a skills crisis.

CN100 2015_Highest employment numbers

Interserve, which last month issued a profit warning due to the new national living wage, saw the biggest rise in employee numbers, boosting its headcount by 62 per cent to 41,091.

The firm acquired skills provider Employment & Skills Group at the end of 2014, as well as entering the Saudi Arabian FM market in a joint venture with Rezayat Group.

Kier’s headcount rose 47 per cent to 15,355. The contractor this year acquired infrastructure group Mouchel for £265m.

Renew saw employee numbers rise 45 per cent to 2,706, Lakehouse’s headcount grew 44 per cent to 982 and Eurovia Group boosted numbers by 37 per cent to 2,649.

At the other end of the scale, Barr Construction* suffered a 24 per cent drop in numbers to just 335 employees. The firm sold its quarries division for £20m in October 2014.

MORE CN100 2015:

CN100 table: The definitive ranking of contractors

Review: The major industry challenges examined

Profit margins: Profitability falls across top 100

Specialists: Who’s top in the leading specialisms?

Employee numbers dropped by 20 per cent at Balfour Beatty to 39,751 in its latest figures, reflecting the sale of Rail Italy and Parsons Brinckerhoff.

The UK’s biggest contractor has suffered a tumultuous time of late, with repeated profit warnings in the past three years.

Headcount fell by 20 per cent to 1,045 at Miller, driven mainly by the sale of its construction arm to Galliford Try in July 2014.

Construction employment as a whole rose 1 per cent in the year to March 2015, according to data published by the Office for National Statistics.

This was down 8 per cent from its pre-recession level but up 4 per cent from its mid-crash December 2012 level.

Increasing skills difficulties

It is skills shortages, however, that remain the greatest concern for the industry.

In a survey published last month by the Construction Products Association, 16 per cent of building contractors reported difficulties recruiting onsite tradespeople in the second quarter of 2015.

This followed 31 per cent reporting difficulties in the previous quarter and was up from just 6 per cent a year earlier.

Carpenters became the largest supply concern in Q2, followed by bricklayers and then plasterers.

A study released last month by professional services body KPMG and the Recruitment and Employment Agency found construction workers were the most in demand of all temporary staff measured across the UK, and behind only engineers for permanent roles.

The same report revealed workers’ pay in the construction sector rose on average by almost 5 per cent between February and May, as the skills shortage continued to drive up costs.

Highest salary risers

According to CN100 data, the firm with the highest rise in salaries was Masterson Holdings, where employees saw a 29 per cent rise to an average of £74,816.

Ardmore handed out an average 18 per cent increase to £50,026, while Osborne employees also saw a rise of 18 per cent to an average of £48,677.

At the other end of the scale, wages at Barr Construction* dropped by 20 per cent to an average of £35,988. Pay at Renew fell 11 per cent to £36,407 and at Interserve declined 10 per cent overall to £21,725.

There is an interesting contrast between these companies that recorded the largest pay decreases.

While Barr saw its headcount fall sharply this year, Renew and Interserve reported dramatic increases in numbers.

By contrast, the firms with the highest wage increases tended to have smaller changes in workforce numbers.

CN100 2015_Highest proportions of wages to turnover

Cape Industrial Services had the highest wage bill as a percentage of its income, according to the CN100 data, at 51.9 per cent. Deborah Services and Wood Group were only marginally behind.

These three were the only firms to spend more than half their income on staff. By contrast, MV Kelly spent just 2 per cent of its revenue on wages, while Winvic and RGCM stood at 4 per cent.

Turnover-wage link

Of the three firms with the highest proportionate salary costs and the three with the lowest, just Cape Industrial Services made the top 75 firms by revenue.

In contrast, the 19 biggest companies all had employment costs of between 10 and 31 per cent of income, which could suggest there is a sweet spot allowing larger contractors to grow without becoming overburdened.

However, those firms in the CN100 that spent the least on their wages were also among those making the most income from each employee.
Winvic made an impressive £1.6m per member of staff this year, according to the data, making it the top of this particular league table.

“We have seen growth in demand for permanent employees and a continued increase in wages”

Richard Gelder, Hays

MV Kelly and RGCM came in third and fifth respectively with £1.4m and £1.2m.

Cape Industrial Services, Deborah Services and Wood Group - the three companies spending more than half their income on wages - were all in the bottom five firms for revenue per employee, among those firms for which there is the required data available.

It was Mears that sat at the bottom of this table, however, with a figure of £64,693 revenue per member of staff.

Average revenue per employee across the whole CN100 was up 8 per cent this year among those companies with available data.

Hays construction & property director Richard Gelder says: “We have seen ongoing growth in demand for permanent employees in the year to date and a continued increase in wages across the sector, particularly in key skill shortage areas.

“Organisations are recruiting regardless of size: rebuilding staffing levels, replacing departing employees and accommodating growth in workloads.

“Skill shortages continue to be an issue across all professional and management disciplines in the sector, and although there is now an active focus on increasing graduate and apprentice numbers by employers, there is not enough supply to meet demand.

“We are seeing the demand for skills becoming more evenly spread across the UK, with skill shortages not confined to London and the South-east.”

*Barr results not reflective of merger with McLaughlin & Harvey

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