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Talent pool shrinks despite output increase

In spite of the recovery, rising output has not been matched by workforce growth over the past two years. But as the latest stats show output stuttering and job numbers edging up, is this curious trend coming to an end?

Among the sectoral trends and quarterly changes, one part of ONS job statistics stands out.

While construction output has risen at a robust pace since 2013, this has not been matched by growth in the industry’s workforce.

Rising output would usually be expected to drive workforce growth as contractors looked to accommodate expanding workloads.

Yet between Q1 2014 and Q1 2015, output increased by 4.4 per cent at an average of 1.1 per cent per quarter.

Workforce numbers, however, lagged behind output considerably, growing at just 1.2 per cent over the period – a quarterly average of 0.3 per cent.

In the 12 months prior to this between Q1 2013 and Q1 2014, the gulf was even wider: output grew 10.2 per cent over this period as the recovery bedded in, yet jobs rose only 2.9 per cent.

How then has a recovering industry produced this disparity – and can such a trend continue?

New-build vs R&M

The expectation that job numbers will match output is especially true of new-build work, which is relatively labour-intensive compared with repair and maintenance activity.

In addition, growth in R&M has been relatively inconsistent compared with new work: R&M output grew 0.4 per cent between Q1 2014 and Q1 2015, whereas new work rocketed 6.9 per cent over the same period, according to the Office for National Statistics.

As a result, the industry as a whole has become increasingly geared towards large-scale, labour-intensive new-build projects.

Construction workforce Mar 13-Mar 15_ONS

Source: ONS

NG Bailey chief executive David Hurcomb says the residential-led recovery has seen work become increasingly labour-intensive.

“There are thousands and thousands of apartments [in London] that have got to get built and fitted out,” he says. “That’s very labour-intensive work.”

“You’re getting a merry-go-round of people moving within M&E”

David Hurcomb, NG Bailey

He says London has already felt the effects of skills shortages, adding that the industry needs to face up to the prospect of severe labour shortages within the next year.

“You’re getting a merry-go-round of people moving within the [M&E] sector,” he says.

“It’s all teed up to bite over the next 12 months – at the moment, it’s the quiet before the storm.”

Recruitment pool shrinks

Aside from jobs growth not matching output, unemployment figures, when looked at in tandem with job vacancy data, suggest the existing talent pool has shrunk.

This in turn threatens to stymie further workforce growth at a time when contractors are looking to recruit.

Job vacancies in construction Mar 14-May 15_ONS

Source: ONS

Data from recruitment site CV Library suggests construction companies can expect to receive only 13.6 applications per role they advertise – much lower than in sectors such as administration, where vacancies attract an average of 57.3 applicants.

The firm says it has seen a 63 per cent increase in the number of construction job postings on its site – despite the fact output actually dipped in the first quarter of 2015.

CV Library managing director Lee Biggins says recruiters saw a slight downturn in postings during the run-up to the election, attributing the drop-off to economic and political uncertainty.

But he expects this to recover in the coming months as construction firms push on with planned works.

Self-employment quashes myths

He adds that there has been a noticeable shift away from self-employment – something reflected in the official statistics.

“During tough financial times, businesses shy away from taking on full-time employees due to the cost and long-term commitment, which results in an increase in contractor positions to fill labour gaps,” Mr Biggins says.

“We’ve seen an exciting upturn in the economy and now companies are more willing to recruit, hire and retain full-time employees.”

Construction output vs self-employed workers Q1 13-Q1 15_ONS

Source: ONS

Traditionally, it was believed that more people became self-employed when work increased and wages rise; when work fell, they sought the security of being employed.

But the data seems to contradict this view.

During 2013, consistent increases in output were matched by growth in self-employment, with the number of self-employed construction workers rising by 59,000.

“More companies are now willing to recruit and retain full-time employees”

Lee Biggins, CV Library

This would seem to support the theory that self-employment rises in line with output growth.

More recent data, however, contradicts this, with the number of self-employed workers falling by 49,000 between Q4 2013 and Q1 2015.

This is despite the fact that output grew every quarter bar Q1 2015, with combined growth standing at 8.7 per cent for the period.

Industry exodus

Declines in the number of self-employed workers leaves contractors with a smaller pool of skilled individuals from which to recruit full-time staff.

The number of unemployed workers whose previous job was in construction has more than halved since the start of 2013, dropping from 167,000 then to 80,000 as of March 2015.

Unemployed former construction workers Q1 13-Q1 15_ONS

This decline of 87,000 could partly be explained by these former construction workers re-entering the industry.

However, the increase in construction jobs over the same period was only 86,000, and therefore could not entirely account for the decline in unemployed ex-construction workers – even before industry newcomers are factored into the increase in jobs.

This means that, inevitably, a significant number of trained workers have left the industry altogether since losing their jobs in the recession.

In turn, there is a very real danger that skills shortages will only get worse unless more workers are trained.

But Mr Hurcomb is frank when he says that the industry “not renowned” for its commitment to training.

“There’s no doubt about it: some companies don’t spend on training and will hire whoever they can get,” he says.

“We don’t think that’s great for long-term sustainability because the quality might not be there.”

He emphasises that different companies have different approaches, but adds that retaining and training staff should be a priority for firms as deepening skills shortages loom.

The majority of forecasters point to further output growth in the short term, despite the recent dip.

As the talent pool continues to shrink and workforce numbers edge sluggishly upwards, alarm bells should be ringing for contractors – even if prospects for new work are on the up.

With that in mind, attracting new workers to the talent pool and upskilling current employees need to be priorities if firms are to take advantage of new work.

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