Uncertainty hampering growth, says new Gleeds report

A new report from international property and construction consultancy Gleeds has revealed that eight out of ten contractors have seen projects stall as a result of current economic uncertainty, with over a quarter predicting that tender opportunities will decrease in Q3 as rising costs, a shifting political landscape, and the war in Ukraine all sap confidence in the market in the short-term.

88% reported experiencing issues with labour supply over the past quarter, with a massive 96% seeing increases to worker’s rates in the same period as the cost-of-living crisis takes its toll. In tandem with rising wages, contractors continue to face mounting materials bills - nearly 70% of those quizzed said that materials prices show no signs of stabilising.

The longer-term view was more positive, however with respondents seeing a strong pipeline of work thanks to spend in defence, improving energy security, and the transition to net zero. 

Meanwhile 75% of those asked told Gleeds that they’d witnessed greater collaboration on projects in the last three months to overcome some of the problems threatening schemes, and over 80% of contractors had also begun to look at sourcing local materials as a way of tackling supply chain issues.

Gleeds CEO Graham Harle said of the findings: “While there is hope that materials prices will stabilise, the ongoing conflict between Russia and Ukraine is likely to result in spiralling energy costs as alternative supplies are sought so I doubt we have seen the last of price rises. Meanwhile, as the cost-of-living crisis bites, staff expect to see their pay increase in response, and with a dearth of skilled labour available big business is willing to do whatever it takes to get enough boots on the ground to get the job done.

“The Construction Industry Joint Council negotiated a 5% pay increase for site workers which recently came into effect, and I think we’ll be seeing raises across the board in the months ahead, even though materials and labour cost escalation remains the number one threat to growth according to those we asked,” he added. 

The report found that 70% of contractors are braced to increase pay by up to 6% in a bid to retain staff, while a further 15% said they planned even higher rises in the next six months as the shortage of labour and materials continues to push up the cost of projects.