Newly released research highlights the possibility of an 8.3% increase in construction labour costs, which could significantly impact the UK’s construction sector in the second half of 2023.
The research conducted by Currie & Brown explains that the ongoing construction skills shortage is a major contributing factor to the predicted wage growth. The skills shortage is the result of several different contributing factors. Domestically, the construction sector has an ageing workforce, many of which have retired early. These sector leavers are not being replaced by the younger generation, who are widely disinterested in a career in construction.
Brexit has compounded the skills shortage. Before Brexit, the UK construction industry was reliant on foreign labour. Post-Brexit immigration rules have reduced the number of foreign workers from the EU entering the UK’s construction sector. These factors have combined to make a perfect skills shortage storm, which has led the Construction Skills Network to predict that an extra 225,000 construction workers will be needed by 2027 to compensate for the shortfall.
Currie & Brown explain in their research that the increased labour costs could have a knock-on effect on project lead times. This is because higher labour costs mean that construction firms must scale back on the number of workers they employ or the total number of hours worked to stay on budget, which would inevitably delay timelines.
Delays could also occur if the scope of construction projects needs to be reevaluated and revised in light of the rising costs, which could result in an expensive and time-consuming planning and adjustment process. The research predicts that the 8.3% increase in labour costs could result in a 50% extension to project lead times.
John Mansfield, the Infrastructure Director at Currie & Brown, said, “Fuel prices are returning to normal and issues around supply are becoming less acute, but we are still contending with the longer-term systemic issue of skilled labour shortages. This is becoming more pressing and is a growing concern for our clients.”
The simultaneous increase in labour and material costs could potentially inflate the UK’s 2023 infrastructure pipeline cost. Some of these escalating construction costs will likely pass onto consumers, especially in the housing market. If construction companies are paying more for labour and materials and taking longer to complete projects, some if not all of the additional expense will inevitably be passed onto house buyers. This could make homes even more expensive in a market already feeling the strain of high prices.
Currie & Brown’s Chief Operating Officer for Europe, Nick Gray, says, “The national infrastructure pipeline is crucial for both the economic health of the UK and improving the entire population’s quality of living through increased access to key services. Therefore, the predicted skills shortage revealed in this report should be seen as a wake-up call for the construction industry.”
Gray argues that the solution to the skills shortage is a collective approach towards training, robust project management, and strict cost controls and risk controls to prevent the collapse of any critical infrastructure projects.