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What sort of employment does recovery bring?

Industry employment held steady during the downturn but the total figure clouds variations between the self-employed and employees.

Employment figures for the UK economy as a whole have remained relatively buoyant during the downturn, much to the surprise of many economists.

This has prompted much debate about what types of jobs are being created. Are they really full-time employed roles in the traditional sense? Or are they self-employed, part-time or zero hours?

Construction has long been an industry with a large number of self-employed workers.

Has the balance of employees to self-employed people in the sector altered over the years? And has that balance been different during the most recent downturn compared with previous ones?

Hikes and spikes

The Office for National Statistics says its workforce jobs data, which covers the number of jobs rather than the number of people, is the best measure of short-term employment by industry.

Construction jobs indices

An index of the total workforce jobs figures for construction and the employed and self-employed jobs in the industry, which uses June 1978 as a base, shows almost all the growth in construction jobs during the period was in self-employed roles.

The number of self-employed jobs has almost doubled, while the number of employee jobs has fallen by 13 per cent. As a result, the total number of jobs has grown by just over 12 per cent.

June 1978 is used as a base because it marked the peak of construction output prior to the first of the last three recessions in the UK.

The big spikes in self-employment came in the 1980s and early 2000s, with the biggest fall at the end of the 1990s.

Construction jobs numbers

Experian head of construction futures James Hastings warns there can be discontinuities in older data. However, he adds that the big rises in self-employment tend to coincide with periods of significant growth in construction output.

The implication is that more people become self-employed when there is more work and wages rise. When work falls, they seek the security of being an employee rather than self-employed.

Data deficiency

It is not possible to graph jobs against construction output for the 1980s and 1990s, partly because the current series of output data only goes back to 1997 and the ONS also made a large methodological change to the data at the start of 2010.

According to some economists, it is better to consider output from 2011 because the change also affected the 2010 output figures.

Construction jobs vs output

The period from Q1 2011 to the same point in 2014 shows jobs and output in construction moving in opposite directions. The number of jobs grew 3.5 per cent while output fell 3 per cent.

Again, the growth in construction jobs during this period was almost entirely in self-employment, which rose nearly 9 per cent, while employee jobs increased by less than 0.5 per cent.

One possible contributor to the growth in self-employment is the accession of 12 states to the European Union in 2004 and 2007.

Mr Hastings says many of the construction workers who came to the UK from the accession states would have been self-employed.

False self-employment

Have attempts by the government to crack down on false self-employment – where employers cut their national insurance bills by wrongly categorising employees and self-employed – had much effect on its levels in the industry?

In October 1995 tax authorities published new guidance to clarify the existing law in this area. Contractors were expected to have finished reviewing the status of their workers by 5 April 1997, according to a parliamentary briefing paper on the topic published in June 2014.

A new scheme to reform self-employment in construction was launched in April 2007.

While there was a dip in self-employment in construction in 1997 and the smallest of downward bumps in 2007, both these falls were temporary and did not affect the long-term rise of self-employment in construction.

It is difficult to calculate how much of the changes could be attributed to fluctuations in output and how much to the government’s actions on false self-employment.

In 2007, output experienced some slight mid-year dips but was heading towards its pre-recession peak at the start of 2008.

CITB research and development operations manager Lee Bryer says the fall in self-employment around 1997 is probably down to a combination of both low output and the tax crackdown.

Pre-recession

Looking at the periods around the last three recessions, levels of employment were still below pre-downturn levels 25 quarters after the peak, with the 1990s downturn showing the greatest fall.

Construction jobs indexed by recession

The obvious outlier on the graph is self-employment during the 1980s recession, which soared despite the economic conditions. It rocketed 37 per cent over the 25 quarters from Q1 1980.

Mr Bryer says a possible contributor to the self-employment rise is that direct labour organisations such as local authorities started to shed their directly employed construction and maintenance workers at the time.

Some of these people would have become employed elsewhere – perhaps by being transferred to private company which took over the work from the council – while others may have become self-employed.

Construction jobs indexed from pre-recession output peak

The following two recessions saw nothing like that level of self-employment growth: it has increased by 3.5 per cent in the 25 quarters since the most recent pre-downturn peak in Q1 2008, but in the corresponding period in the recession of the 1990s it fell by 3 per cent.

Employee jobs all ended the 25 quarters after the start of the three downturns below their peak, with the 1990s particularly hard hit.

Shrink and grow

While self-employment may have seen the biggest growth since both 1978 and 2010, the majority of construction jobs have been and remain employee roles.

In the first quarter of 2014, 60 per cent of construction jobs (1,254,000) were for employees.

This is perhaps part of the reason that, despite a significant percentage rise in self-employment from 2010 to 2014, the total number of construction jobs fell by 177,000 between Q1 2008 and Q1 2014. 

While the UK economy has experienced around a 3 per cent rise in the total number of jobs between 2008 and 2014, the number of construction jobs has shrunk by 5.8 per cent, showing that some industries have yet to join the rise in employment.

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