This Town (Town)… Is Coming Like a Ghost Town

Michelle Lowe is the Founding Director of Redshell Consulting Limited. In this article, she talks about the problem of labour shortages in the construction industry.

The Construction Industry is busy! Booming maybe. There is no shortage of new and exciting projects, main contractors are busy tendering, suppliers and manufacturers are reporting no downturn in demand. After the rocky past few years, this should be good, you say?

We’ve weathered the COVID storms over the last 18 months. The site closures, the CILC and government directives on remaining operational during the pandemic and safe working practices, the isolations and even we, to a fashion, are weathering material delays and price hikes as a result of Brexit. 

What we are not weathering, what has brought our sites and projects to an absolute standstill recently, is a much more homegrown issue.

Labour shortages.

For the last three months I have noticed, with alarming blatancy, the painfully slow, if any, progress on some of my live sites. I have never experienced such obvious downturn in productivity over my time in the industry over multiple projects. The odd one maybe, for reasons altogether outside of this. But not across the board.

On my last few site visits, I haven’t taken any progress photographs. Too embarrassed, I think. I can barely see any progress of the project. Valuations have been pitifully low, and the head count? Well, even my £5m build had just two operatives working on-site at the last visit.  

I just couldn’t bear to share any more photos of the same steel frame that was still going up!

The frustrations are tangible, and confusing! With the industry still busy, projects, funding and workflow all available, it made no sense that productivity could be so slow, and with both the client team and main contractor unable to do very much about it.

Construction programmes are now stretching like elastic, with everything pretty much a fluid best guess. We are in the hands of the gods. Well, the operatives. But right now, that seems like quite the same thing.

This isn’t just a site by site problem, nor I think a blip over the summer of 2021. This has a far-reaching implication that I suspect is going to get much worse before it gets better.  

The Construction Leadership Council reported construction output in June 2021 at just 0.3%.   A fall of 1.3% in the month, combined with a 25% increase in vacancies from the pre-pandemic times of 2019. Yet, new construction orders grew by a whopping 17.66% over the second quarter of 2021. Can you foresee the problem here?

The labour shortages we are currently experiencing, however, are not just a result of the current high demand but compounded by a lack of homegrown skilled workforce in the first instance.

Now, who didn’t know this was coming? Who hadn’t heard the phrase ‘labour shortages’ or ‘lack of skilled workforce’ over the last 10, or even 20 years? Government initiatives had been made with various parties, the CITB (Construction Industry Training Board) and the like to encourage careers in construction. But I guess, with less than desirable results. 

Construction News has reported that we are currently running at 100,000 fewer construction workers currently in the UK than in March 2020, pre-pandemic. 100,000 fewer naturally, let alone the increase in construction orders. Construction News predicts a requirement of 217,000 new construction operatives in order to keep up with demand.

We have relied heavily on the influx of construction workers from Europe or even further afield over the last decade or so. The ability to rely on this, it seems, is firmly over.

Speaking with main contractors has revealed some of their frustrations currently experienced. The procurement process for any trade is now incredibly long and difficult, with tendering to up to 10 different subcontractors required for each trade. Trying to get a response, trying to get interest, trying to get a commitment, trying to get a reasonable price. The subcontractors in high demand, particularly over the summer with a reduced workforce, are able to pick and choose, to dictate their availability, lead in and of course their prices. And if a job is not of interest, then straight up turn it down.

Our project at Stratford stood still for the summer whilst the bricklayers went home to Europe. In past lives we would have replaced the bricklayers with a company whom were able to resource. The project led. It doesn’t now. 

Reading the news this week, this doesn’t seem to be solely a construction issue. Sky News reported on the current vacancy crisis, with the top 10 jobs where people are needed now. HGV drivers and nurses top the bill, with metal working production and maintenance fitters at 8th and carpenters and joiners at 9th place. In my own experience bricklayers need to be added to the mix.   

Filling these voids won’t be an easy task, and with any trade taking some years of training and experience before they become viable, we will have a lull in resource for some years yet. 

What this has brought about are some considerable labour rate price increases in recent times as demand outstrips supply. 

The latest labour data from the ONS showed the average weekly earnings for people in the construction industry have jumped almost 14% between April 2020, when the UK was in lockdown, and April 2021. It is the highest increase recorded in any industry. This may be our only carrot to dangle.

Material prices are shooting through the roof, labour rates are shooting through the roof, construction projects are systematically delayed. So, who pays the bill for all of this? Well, in the first instance the main contractors, depending upon the form of contract, are responsible for the resourcing of the project. But let’s not all be naive and think that these cost increases won’t filter through to the developer, employer and end purchaser.  

There are two parts of the chain that are not having to suffer the escalating costs at the moment: suppliers and subcontractors alike. For the first time these parties are standing firm, sitting comfortably in the supply and demand chain, and with a regal wave of a godlike hand, they are currently dictating.

Will construction costs, both labour and materials stabilise? Will we be able to adequately resource our projects? Stay tuned for the next exciting instalment.