Skills "Brexodus" continues to deepen industry's skills shortage, new report says

As the UK fast approaches its March 2019 deadline to leave the European Union, a new report has sent out a stark warning about the growing skills shortage which is being exacerbated by the departure of EU migrants.

The latest quarterly analysis report undertaken by consultant Turner & Townsend states that “mounting a successful recruitment fightback has never been so important” with the ever-increasing skills shortage meaning escalating labour costs and profits slashed.

Turner & Townsend forecast the infrastructure sector will see the fastest tender price inflation this year (3.8%), with more measured growth (1.7%) anticipated for building projects.  This growth is however tempered by labour cost inflation forecast to rise by an average of 4% the next 12 months – risking contractor margins as projects compete for limited labour.

Potentially more worryingly for the industry is figures showing that at the time of the EU referendum, 49.6% of the capital’s construction workforce had been born abroad – this has since plunged by seven percentage points – the fastest 18-month decline seen in 15 years.

Paul Connolly, managing director of cost management at Turner & Townsend, said: “Mounting a successful recruitment fightback has never been so important, but to do this the sector needs full-throated support from employers – beyond existing contributions through initiatives such as the apprenticeship levy.  Contractors need to ensure that the skills initiatives and incentives are in place to attract a modern construction workforce and make sure we have the capacity and talent in the right areas.”

The paper also finds that across UK construction, businesses are operating at an average of 86.2% of capacity in Q1 2018 – up 1.9 percentage points from Q1 2017.  This comes despite ONS data showing a fall in total construction output fell by 0.8% in the first three months of 2018.

UK regions are said to be relatively less exposed but face a separate skills challenge from an ageing workforce.  While the north east of England only has a migrant workforce of 5.9%, 53.9% of workers are aged 45 or over.

“It’s going to take time to tackle this demographic timebomb,” Connolly added. “At a project level, the industry needs to be arming itself with strategies to mitigate wage inflation and drive maximum productivity from a diminishing labour pool.  We need to be following a pre-emptive approach, adopting lean thinking to streamline project processes from design through to delivery, and leveraging the full benefits of technologies such as off-site construction."