“The repercussions of this [skills] shortfall would be significant,” – Nick Gray, chief operating officer, UK & Europe, Currie & Brown.
The skills shortage now poses a bigger threat to the construction industry than materials costs – potentially delaying projects and putting national infrastructure delivery at risk.
Labour availability is now the “most concerning risk factor” within the construction sector, according to cost management consultant, Currie & Brown.
Overview
225,000 extra construction workers are needed in the UK by 2027, according to the Construction Skills Network.
However, repercussions from Brexit have seen a shortfall of 330,000 people in the UK labour force.
On a typical construction project, labour costs normally account for around 40% of programme expenditure.
However, construction labour costs increased by 5.8% in Q4 2022 – and are predicted to increase by 8.3% through 2023, according Currie & Brown’s UK Construction Market Outlook.
And while materials and energy costs are beginning to ease, labour shortages are currently helping to sustain high inflation by driving up expenditure – and therefore must be factored into cost and risk projections, C&B urged.
National infrastructure
With signs the residential and commercial markets are now cooling, major public sector development is expected to be the primary driver of sector growth, said C&B.
It anticipates construction activity slowing during 2023 and flatlining through 2024, but then accelerating from 2025 to 2030.
It also estimates £900 million will be added to the cost of the UK infrastructure pipeline by inflation in 2023, roughly equivalent to a major new hospital.
The report identifies the UK National Infrastructure Programme as the “key to industry growth” – notably major rail, maritime and large-scale hospital schemes.
However, it forecasts the demand for skilled professionals is likely to outstrip supply, threatening delivery of major infrastructure.
“Inflation looks to be losing momentum, but acute construction skills shortages remain and will help to keep costs high,” said C&B. “This is increasingly concerning as the National Infrastructure Programme becomes ever more critical in stimulating growth up and down the UK.”
‘To borrow and to borrow and to borrow’
Despite various funding allocated to construction in the Spring Budget (£20 billion for Carbon Capture and Storage, £200 million for pothole repairs, £400 million for Levelling Up projects, and 12 new UK Investment Zones), UK Government borrowing remains at a historic high and its long-term plan is to cut spending and reduce debt.
This is also in part due to a weak British pound (Sterling trading at $1.25 and €1.15) and public sector net debt at 99% year to date and government borrowing up £132.2 billion.
Cost and risk management
The skills shortage is outpacing materials costs as the biggest challenge facing the construction industry, data from the start of the year to date suggests.
In turn this could impact budgets and project viability, potentially leading to delays or re-scoping.
Fresh procurement challenges coming from this means firms will need to engage early with contractors to ringfence labour and expand supply chains, said C&B.
Consultants, contractors, manufacturers and suppliers also must coordinate sooner and more fully.
And investing in advanced technologies (AI) will increase design and cost efficiencies, mitigate risk, and improve safety and offsite construction innovations.
Currie & Brown report – key takeaways
- Robust project management
- Continuous, close control of cost and risk
- Embrace Modern Methods of Construction (MMC)
- Embrace advanced tech for efficiencies
- Collaborative effort on training from partners
“The repercussions of this [skills] shortfall would be significant,” said Nick Gray, chief operating officer, UK & Europe, Currie & Brown. “Scarcity elevates cost, and with labour typically accounting for 40% of project costs, any uplift in this area will have a serious impact on overall budgets and project viabilities. This in turn could lead to projects being delayed or re-scoped, diminishing their potential to support economic growth and societal needs.”
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