Skills shortages biting the North West’s construction sector once more

Construction work

Workloads in the North West’s construction and infrastructure sector remained healthy in the third quarter of the year (Q3 2017), according to the latest RICS (Royal Institution of Chartered Surveyors) Construction and Infrastructure Market Survey, with 25% more respondents seeing a rise in workloads during Q3 2017.

However, while activity remains steady, comments left by respondents continue to highlight Brexit-related uncertainties as weighing on investment decisions and the lack of sufficiently skilled workers also remains an obstacle for many businesses.

Having eased throughout 2016, the intensification of labour shortages is biting once more in the quarter with 57% of contributors citing the lack of quantity surveyors as an obstacle, and 50% reporting a shortage of other construction professionals and tradesmen as an impediment to growth.

Despite government efforts to bolster the workforce and the prominence of apprentices, through an apprenticeship levy introduced earlier this spring, only 42% of respondents feel that government-funded programmes are moderately effective, with one-third unsure. The quality of the talent pipeline is insufficient as well – less than half (45%) of employers who currently hire apprentices view them as a long-term solution to their hiring needs.

Breaking the rise in workloads and activity down to a sector level, growth is strongest in the private housing sector, with 41% of respondents reporting a rise in workloads on such projects. The private commercial property sector also fared well with 23% of respondents reporting a rise in workloads. Meanwhile, work on both public non-housing schemes and infrastructure projects lacked momentum during the third quarter of the year, with only 14% of respondents reporting a rise in workloads across both property sectors respectively.

Despite uncertainties, 45% of respondents expect workloads in the North West’s construction and infrastructure sector to rise rather than fall over the year ahead. Meanwhile, 28% more contributors expect employment to rise rather than fall (up from 26% in Q2).

While a shortage of workers is hampering activity and profit margins, financial constraints are still reported to pose the most significant challenge, although the share of contributors expressing this view has come down to 69% (from 79% in Q2). Access to bank finance and credit remains by far the most frequently cited issue, followed by cash flow and liquidity. This likely reflects a more cautious stance by banks given cyclical market conditions and Brexit considerations.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with only 16% of respondents expecting a rise in profit margins over the coming year. This is likely to have impacted tender pricing as well, with 62% and 56% more respondents in the building and civil engineering areas, respectively, envisaging greater price pressures.

Darren Hurst of AA Projects Ltd in Manchester said: “Currently there is a shortage of experienced flat roofing contractors and the net result has been an increase in tender priced returns for large flat roofing projects in the public sector.”

Tim Lambourne MRICS of Lambourne Associates Ltd in Cheshire added: “We are currently working in the nuclear sector and it is relatively buoyant at the moment.”

Jeffrey Matsu, Senior Economist concluded: “While activity in the sector has moderated, growth and growth expectations remain positive. Uncertainties due to Brexit continue to weigh on companies’ investment and hiring decisions, and banks appear to be adopting a more cautious stance to providing finance. Meanwhile, challenges related to an inadequate supply of skilled labour are as pronounced as ever.”