The labour shortages facing the UK’s construction industry are the result of a  post-lockdown boom, according to a study of the current jobs market from specialist recruiter Randstad.

Randstad looked at changes in the ratios of vacancies to applications for jobs in the UK’s construction sector – using the volume of applications as a proxy for candidate volumes – across the UK’s construction workforce.

In the first half of 2020, Randstad said they had eight applications for every construction sector job advertised.  During the first half of 2021, this ratio fell to five applications per job.

Randstad says that, while the number of applications for construction sector roles fell by 23 per cent, the number of vacancies rose by a greater degree – increasing by 39  per cent.

Other industries were found to be experiencing similar trends. The biggest change in the supply and demand was in engineering roles.  In the first half of 2020, there were 17 applications per vacancy.  A year later, there were only four applications for every role.

Adrian Smith, senior director of operations at Randstad UK said, “There are staff shortages across the west, including the UK.  The construction industry is struggling to fill jobs in Ireland, of all places.

“So, we don’t think the labour shortages we are seeing in the UK are not, on the whole, being driven by a dearth of EU labour following Brexit.  The UK’s settlement scheme for residents of the EU had, by the end of May, received more than 5.6 million applications and at that point the programme still had a month to go. The ‘Brexodus’ hasn’t played out as we feared.

“Essentially, this is not primarily about a constriction in the supply of labour.  Workers are back in power because of the success of the vaccine rollout and the removal of lockdown restrictions – and the resulting economic bounceback – even with construction output having fallen recently.”

Randstad says that agile employers need to adapt to secure their first choice of candidate.

Mr Smith continued: “The end of furlough at the end of the month should unlock a chunk of the labour supply but it won’t solve the labour shortage problems overnight.

“The first thing to do is reevaluate your asking salaries and hourly rates. Construction employers are not, somehow, immune from these market forces.  At the start of the summer, we were seeing the average pay packet for construction workers up by 14 per cent compared to the same time last year.

“Second, if you find the right person, move fast – much faster than you would have done two years ago.  There are so many organisations looking to hire right now that, if you move slowly, you will miss out on the best people.

“Third, consider making more use of contractors and temporary staff, rather than focussing solely on permanent hires.  While the costs aren’t all that different, casting the net wider can help you secure a candidate who really fits the bill.”

“Lastly, if you are hiring office workers, rather than people on site, use remote working to widen your candidate pool.  Employers who demand people come into the office are now missing out on candidates to a degree that didn’t happen before the pandemic.  This change should go hand in hand with a re-examination of your wider benefits package in line with your  competitors.  Top of the list for workers at the moment is more flexibility.”

With six weeks to go until COP26, engineering alliance Actuate UK has issued a stark message to world leaders gathering in Glasgow, urging them to tackle the climate crisis now “before it is too late”.

The body, which represents eight of the UK’s major engineering services trade bodies, says the construction industry is committed to helping in the fight against global catastrophe – but leaders must have “the courage and vision” to make it happen. And it has repeated a call from its recent manifesto for the widespread rollout of renewables technology toreduce the carbon impact of buildings across the globe.

Leaders will meet for the UN Climate Change Conference – also known as COP26 – from October 31 to November 12, to discuss how to hit climate change targets, including securing net zero by mid-century and keeping global warming to below 1.5 degrees.

Fiona Hodgson, CEO of SNIPEF,  echoed the call for immediate action, saying it was vital for leaders to commit to action now. She said: “There is no doubt that the construction industry has the skills and innovation at its fingertips – we just need those in power to have the courage to make the green revolution a reality and agree to roll out such innovation on a mass scale.

Alan Wilson, Managing Director of electrotechnical trade association SELECT, said any potential action should follow the net zero pledges contained in the Actuate UK manifesto, which was published earlier this year. He said: “We have already called for efficient heating and cooling in buildings, improved indoor air quality and a fast vehicle charging infrastructure – all things that are within reach and can bring about change if we are bold enough to make them happen.

“Actuate UK itself is committed to making a difference, with our members pledging to see net zero targets achieved in existing buildings through retrofit activities, and to assist with the uptake of low-carbon technologies across government, industry and operators.

“In addition, we are committed to demonstrating how carbon emissions from the materials, construction and the use of a building over its entire life, including its demolition and disposal, will comprehensively affect standards, quality, education and training. Such examples can, and should, be followed by others around the globe so we can make a difference together.”

Chris Yates, CEO of the Federation of Environmental Trade Associations, another leading Actuate UK member, said it was also vital for the industry to make its views known to bring about change. He added: “All of us who work in the engineering services have a duty to make our voice heard and repeat the message that the technology and techniques that can make a difference to tomorrow are already here and need to be rolled out today.

“Without these voices being heard, and our leaders making real change at COP26, we will just continue to sleepwalk into disaster and leave a legacy that no one will be able to repair.”

Formed in February 2021, Actuate UK bridges the gap between products, installation and end use. It demands decision makers to listen to the professionals whose skills turn vision into a practical reality for everyone.

SIG plc has revealed its half year results for the six months ended 30 June 2021 which has revealed continuing recovery with the like‐for‐like sales of £1.1 billion, up 33% on prior year, and 1% up on 2019.

SIG achieved operating profit of £13.6m in the first half, a sharp turnaround on the loss of £42.9m last year. Profit Before Tax came in at £3m although after tax it reported a total loss of £8.1m and again did not declare a dividend. It ended the period with net debt on a pre IFRS basis of £57.5m, down from £90m a year ago.

In the UK SIG Distribution showed continued progress in regaining market share, delivering underlying revenues of £239.3m (H1 2020: £154.9m), a LFL increase of 54%. Despite supplier shortages and material allocations, specifically around plasterboard, daily sales show consistent progress. The improved trading volume drove a substantially lower loss, with the business driving the additional volumes through the existing capacity in the network. This resulted in an underlying operating loss of £5.4m (H1 2020: £27.4m loss).

The UK Exteriors business benefitted from strong demand, and saw underlying revenues rise to £199.2m (H1 2020: £125.3m), a LFL increase of 58%. The increase in revenue, further benefitting from an increased margin due to rebates and mitigation of input price increases resulted in an underlying operating profit of £7.9m (H1 2020: £8.6m loss).

Steve Francis, SIG’s chief executive, said: “I’m delighted with the progress of our Return to Growth strategy; our customers, supplier partners and colleagues continue to affirm that our focus on empowered and entrepreneurial local teams, delivering exceptional service and expertise to our customers, is a successful approach for building back our market share and profitability.

“Trading in July and August has continued to be solid and we expect continued profit improvement through H2 2021, despite the ongoing impact of material shortages and cost price inflation. As a result, providing the disruption from these headwinds does not worsen, we now anticipate full year underlying operating profit will be ahead of our prior expectations.”

Andy Murphy, Director at Edison Group, commented: “SIG has made strategic progress on recovery and invested in people, the business model and its service offering. It has added experienced MDs in Germany and Benelux which means that all countries now have an MD, rebuilt the UK leadership team with new experienced hires, added 86 commercial or branch managers in UK Distribution, added training programs in France and Poland and increased focus on H&S across the Group.”

A groundbreaking new film which explores the UK construction industry’s response to the Grenfell Fire tragedy will be premiered at UK Construction Week in Birmingham on Tuesday 5th October.

Produced by Vivalda Group and award-winning filmmaker Hamlett Films, the 20-minute documentary is entitled ‘Behind the Façade’ and includes contributions from architects, specialist contractors, suppliers and those personally affected by the cladding crisis. The film seeks to encourage an honest debate within the construction industry about critical issues such as safety, responsibility and quality as the new Building Safety Bill progresses through the House of Commons.

Key industry figures taking part on the film include:

  • John Barnes           Managing director, Roofdec Limited
  • David Frise             CEO, Building Engineering Services Association
  • Peter Johnson       Chairman, Vivalda Group plc
  • Tim O’Callaghan.  Director, Nimtim Architects

Commenting on film, chairman of Vivalda Group Peter Johnson, said: “As founder of Vivalda, I’ve been in the cladding sector for over 40 years and was absolutely shocked by the events of Grenfell and the revelations of the subsequent enquiries. I hope this film in some small way helps the industry to take stock and re-evaluate its attitude to safety, profit and responsibility. We need to encourage a genuine culture change within the industry and the new safety bill is a significant opportunity to make a real difference.

“I’d like to thank all of the people who have contributed to our film and hope that Behind the Façade acts in some way as a catalyst for positive change. This is a conversation the industry needs to have.”

The film is being shown at 16.00 on Tuesday 5th October at UK Construction Week at the NEC Birmingham. It will be followed by a panel debate, led by industry commentator and journalist Adrian JG Marsh.

To book your free ticket to the film premiere, please go to: https://ukconstructionweek-2021-visitor.reg.buzz/behind-the-facade-film – searching under the seminar section of the UK Construction Week website.

The government has published its long-awaited ten-year National Infrastructure and Construction Pipeline. Between £21 billion and £31 billion of contracts across economic and social infrastructure will be brought to market over the next year, with a projected £650 billion over the next 10 years.

The Infrastructure and Projects Authority’s (IPA) new national infrastructure and construction pipeline covers procurement plans for the next year and beyond, with details on the value of contracts and dates on when they will be awarded. More than 400 contracts are listed for the upcoming year, and mainly cover developments in the transport industry. The pipeline will support 425,000 jobs annually on average over the period 2021/22 to 2024/25.

In the five years up to 2024/25, the government expects to contract out around £200 billion worth of work. The transport industry will benefit from £70 billion of that fund, while £51.3 billion will go towards the energy sector. More than £50 billion of the transport fund will be in public contracts, while the remainder will be for public-private partnerships.

The IPA’s flagship change programme, Transforming Infrastructure Performance: Roadmap to 2030, was also published alongside the pipeline. It brings together the IPA’s diverse infrastructure expertise to lead real system change across government and industry.

The latest ONS data shows that construction output has fallen for the fourth consecutive month, taking output below the pre-pandemic level in February 2020, is a wakeup call that the construction industry is struggling.

Monthly construction output fell by 1.6% in July 2021 compared with June 2021, falling to £13,660 million, and follows the 1.3% monthly decline in June 2021. This is the fourth consecutive decline in monthly construction output.

In July 2021, anecdotal evidence received from survey returns to the Monthly Business Survey for Construction and Allied Trades suggested that the rising prices of raw materials such as steel, concrete, timber and glass was a contributing factor to the monthly fall in volume terms. Anecdotal evidence also suggested supply chain issues were a factor, with many contributors stating that while order books were healthy, the availability of certain construction products was impacting on projects currently under way.

Industry leaders have called on both government and construction family to pull together to address the current shortage of skills and materials driving the decline in construction.

Brian Berry, Chief Executive of the FMB, said: “Disappointingly, we once again see construction output fall, putting it below pre-coronavirus levels. We know that material price increases and skills shortages are contributing to the decline, with members telling us this is their number one issue. According to a recent FMB survey 98% of builders are facing material price increases.

“Worryingly, new work and repair and maintenance in private housing are the main causes for this decline, which are the backbone of the workload for small builders. I’m concerned that despite the high demand for home improvements, something which could stimulate economic recovery, we see this sector on the decline. We must pull together as an industry and press government to ensure these issues are dealt with quickly.”

The latest IHS Markit/CIPS UK Construction PMI Total Activity Index has reported that order growth eases to five-month low during August.  Construction firms reported sustained, and severe, supply chain disruption in August, which contributed to an accelerated rise in input prices, and one that was the second sharpest in the history of the survey.

The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI® Total Activity Index posted 55.2 in August, down from 58.7 in July, indicating activity has expanded in each of the last seven months.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Formidable supply chain pressures restrained purchasing activity and building projects across the board in August as 68% of construction companies reported even longer delivery times for materials compared to July. A combination of ongoing covid restrictions, Brexit delays and shipping hold-ups were responsible as builders were unable to complete some of the pipelines of work knocking on their door.

“Material and staff costs went through the roof as job hiring accelerated to fill the gaps in capacity left behind by employee moves, overseas worker availability and brought on by skills shortages. Paying higher wages for experienced staff along with low stocks of materials at suppliers meant inflationary pressure rose at a rate almost on a par with June’s survey record. 84% of supply chain managers reported paying more for their purchases.

“These obstacles to construction’s progress are set to continue and are now affecting last year’s strongest performer – house building, which will exacerbate the problem of housing supply. However, optimism improved on last month as more than half of building firms believe that output will continue to rise in the year ahead.”

Usamah Bhatti, Economist at IHS Markit, which compiles the survey said: “The rate of input cost inflation faced by construction companies accelerated to the second-fastest on record, while the increase in subcontractor rates hit a fresh series high, fuelled by supply shortfalls in the sector.

“Despite this, businesses noted a stronger degree of optimism regarding the year-ahead outlook, as more than half of survey respondents predicted a rise in activity. This was underpinned by expectations that new contracts would be brought to tender across the construction sector as markets continued to recover from the economic disruption caused by the pandemic.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, commented: “The construction industry is fast becoming a victim of its own success. The supply chain problems are no longer just project speed bumps; they’re applying the brakes to new orders as well.

“Soaring prices of key building materials, not to mention patchy availability and lengthy delays, have forced some construction firms to admit to clients that they simply cannot keep up with demand for building projects.

“With steel, timber and fuel costs all mushrooming, contractors are seeing their margins eaten away. The pipeline of new work is still healthy by historical standards, but orders are now coming in at the slowest rate since March.

“But despite a growing sense that the post-lockdown boom may have peaked, the mood in the industry remains overwhelmingly upbeat. More than half of the builders surveyed for the PMI predict a further increase in activity over the coming year.

“Cool heads in the industry have seen this all before, and experienced developers and builders are recalibrating prices and schedules and getting on with it.

“But there is still the nagging question about the painfully high levels of material cost inflation; is it a blip, or will it start to impact not just the delivery of projects, but demand as well?”

Total new work increased for the fifteenth consecutive month in August. While the latest improvement in order books was marked overall, the rate of growth softened to the weakest since March. Businesses noted a continued resumption of projects that had been delayed due to Brexit and the COVID-19 pandemic, though client confidence was dampened.

Looking ahead, construction companies remained highly upbeat about their growth prospects over the coming 12 months. Positive sentiment was underpinned by hopes of an expected rise in new contract awards across all subsectors of construction.

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Skills shortages challenge rising order books for specialists

The latest sector-wide Building Engineering Business Survey, sponsored by Scolmore, shows that, while turnover is predicted to grow through the rest of 2021, ongoing materials and labour shortages are likely to worsen.

The survey, which includes data from industry trade bodies ECA, BESA, SELECT and SNIPEF, shows that specialist contractors are particularly concerned about lack of skilled staff able to meet growing demand for the sector’s services.

There are shortages of skilled labour in all specialist sectors, and this is pushing up labour costs. As a result, 26 per cent of survey respondents said they would hire fewer agency workers and subcontractors in Q3 compared with Q2. Just under a quarter (23 per cent) said they would hire fewer apprentices despite the urgent need to increase the flow of new skilled people into the industry.

Nearly two thirds (61 per cent) said they expect the ongoing shortages of materials and equipment to deteriorate as the year goes on (Q3 vs Q2). Individual respondents highlighted the lack, and rising prices, of cables, cable trays and containment, as well as growing lead times and delays in deliveries.

However, more than 8 in 10 (85 per cent) of respondents expect their turnover to remain the same or increase in Q3 2021, compared with Q2. Almost 9 in 10 (87 per cent) expect turnover to stay the same or increase between now and the end of 2021.

Rob Driscoll, ECA Director of Legal and Business, said: “A backlog of jobs may appear good on paper, but if the ongoing shortages are not resolved soon, in practical terms, this will mean a further squeeze on costs and margins for contractors who are at risk of tendering for today and buying negative cash-flow problems for tomorrow.”

BESA’s director of legal and commercial Debbie Petford also called for an increased focus on training for competence and compliance to fix some of the industry’s longer-term problems. She said: “While shortages of materials are clearly an immediate problem and will persist through the rest of this year, we must also find a way of addressing these endless cycles of skills shortages that make it very hard for businesses to plan with confidence.”

Alan Wilson, Managing Director of SELECT, said: “As this survey shows, there are very real concerns about the availability of competent people, so it’s essential that we train the talent of tomorrow now and equip them with the skills to thrive in the electric future that awaits us all.”

Fiona Hodgson, Chief Executive of SNIPEF, added: “We continue to hear from members that there are simply not enough skilled installers to meet current demand. With fewer apprentices being recruited during the pandemic this has exacerbated the issue and we are deeply concerned this will impact on Government targets and future projects.”

Ray O’Rourke, the founder and chief executive of Laing O’Rourke, one of the UK’s leading contractors, has confirmed in an interview with the Financial Times that he is searching for a new chief executive to take the construction giant into its next phase of development.

Once the new chief executive is in post, Mr O’Rourke, aged 74, revealed that he is also considering floating the company within the next three years.

Mr O’Rourke had lined up Anna Stewart as a his successor as chief executive, but ill health forced her to step aside in 2015. Mr O’Rourke and his brother Des, aged 72, are the biggest shareholders in the company. Ray’s son Cathal is managing director at Laing O’Rourke Australia.

In its accounts for the year ending March 2020 the firm reported pre-tax profit of £45.5 million on sales of £2.4 billion. The new chief financial officer Rowan Baker indicated to Building magazine in December last year that Covid shutdowns  could see revenue fall  between 10% and 20% for the year to March 2021.

Knauf UK and Ireland has appointed Ian Stokes as Managing Director. Mr Stokes returns to the business after spending five years managing the Knauf Northern European region.

Mr Stokes has worked for Knauf since 1995, joining the marketing team initially and progressing through commercial roles before being appointed Managing Director in 2010. The transition back into the UK business has been gradual, with a full-time focus beginning in May.