Construction labour – will the Shortage Occupation List make a difference?

The cost and availability of labour is anticipated to be the major barrier to the delivery of construction projects over the next year.

According to the Office for National Statistics (ONS), more than one in five construction businesses are experiencing a shortage of workers. A report from the Construction Industry Training Board (CITB) earlier this year estimates that an additional 224,900 workers are required to meet UK construction output between 2023 and 2027 (44,980 per year).

The government introduced some measures to try to tackle this problem in its Spring Budget – most notably additional construction labour categories to the Shortage Occupation List (SOL).  This added a variety of new construction roles that included bricklayers and masons, roofers, roof tilers and slaters, carpenters and joiners, construction and building trades, and plasterers.

But is this enough of a commitment to satisfy any expected growth of the construction industry?

BCIS gives its verdict.

Construction comes of age

It’s a problem that organisations such as The Construction Products Association (CPA) have highlighted for years.  According to their Construction Industry Forecasts (2023-25) ‘the largest losses of employment in the UK-born construction workforce have been between ages 45 and 59 years old’, since the pandemic and Brexit.

With ‘the big spike in employment in the 50-64 age range’ they predict that ‘construction will be losing around 500,000 workers (around one-quarter of the workforce) in the next 10-15 years.’ It suggests this issue has accelerated considerably over the past three years and has been exacerbated by long-term health issues attributed to Covid.

The UK labour force is currently smaller than it was prior to the Covid-19 pandemic, which has impacted our industry. When compared to pre-pandemic levels (4Q2019), the overall construction workforce has shrunk by 139,000 – in part, because of long-term sickness amongst the older age cohorts. However, there’s evidence this trend was emerging before Covid – according to the ONS ‘the number of working-age adults who are out of the labour market (known as “economically inactive”) because of long-term sickness has been rising since 2019, from around 2.0 million people in spring 2019, to about 2.5 million in summer 2022.’

The government has introduced a number of incentives – such as its returnships scheme – to lure this demographic back into work or encourage them to retire later. But it’s unlikely this will have much impact, as many of the people in this age bracket who work in physical construction have either already retired, or have a change in attitude towards work, brought about by the enforced break during the pandemic. A recent study from the ONS found that 82% of adults who had considered returning, but decided not to, felt they had the skills needed to get a new job.

The age-old youth problem

Although the changes to the SOL may address some of the short-term problems for some industries, the fundamental issue that needs examining for the UK construction industry are the barriers for young people entering construction. According to Turner & Townsend (T&T) ‘the number of 16–24-year-olds enrolling in construction training schemes is now barely a quarter of its 2007 level and too many still see the sector as low tech, manual labour, with limited opportunities for progression.’

The industry suffers from entrenched stereotypes and has never been viewed as the most glamorous of industries – personified by images of men in steel-toe cap boots and hard hats on building sites. But from innovative social housing projects to cutting edge hospitals and major infrastructure works such as Crossrail or HS2, the industry has the power to improve health and wellbeing and positively impact change in society – an aspect that isn’t shouted about enough when attracting new talent who are seeking purpose-driven careers.

More needs to be done to raise awareness of the wide variety of roles within the industry, as well as the rewards that make the hard graft of years of training (in quantity surveying, civil engineering or skilled artisanship, for example) worth it.

A man’s world

One of the government’s most lauded new measures was its significant boost in childcare support – up to 30 hours of government-funded childcare for eligible parents. While this measure will be a welcome boost for many parents, the main group to be positively impacted by this are women, for whom the high cost of childcare can often outweigh the financial benefits of work.

Currently, women account for 14% of the construction industry workforce – with just 1% in skilled tradespeople roles and 16% in senior management roles. As with the younger demographic, this is a long-standing problem caused by a complex array of challenges that need to be addressed – from tackling the gender pay gap (construction has the worst of any industry) to designing health and safety equipment that’s suitable for women.

The good news is that 37% of new workers in the construction industry are female and the number of women has increased from 291,000 to 311,000 since the beginning of the pandemic.

Survival of the biggest

The shrinking of the construction workforce has been largely driven by a significant decline in the number of self-employed persons (161,000). While the total number of people employed in construction has increased by 3.1% since 4Q2021, the self-employed workforce has declined by nearly 5% during the same period.

Self-employed construction businesses tend to have less financial and administrative resilience than larger firms, not least when faced with a variety of challenges:  IR35, reverse charge VAT legislation, volatile materials availability and costs, government policy reversals, rising PI insurance costs and trade credit insurance costs.

In particular, the latest ONS annual business demography data shows we lost over 3,330 civil engineering firms in 2021 (up 35% compared to 2019 figures). Taking into account business creations, the number of active firms in the civils sector was 3% smaller than the 2019 pre-pandemic period.

This could be having a particularly adverse knock-on effect when it comes to the supply of skilled and other operatives – in its Workload Trends Survey, for the first quarter of 2023, the Civil Engineering Contractors Association (CECA) found that 63 per cent of firms reported issues with the supply of skilled operatives, and 48 per cent with the supply of other operatives. At a national level, the supply of skilled operatives was cited as the largest dissatisfaction for firms in England (74%) and Scotland (52%).

The legacy of Brexit

Brexit continues to have an adverse effect on the construction workforce, with EU workers returning to their home countries. Some have been unable to fulfil employment requirements or have chosen to work in other countries. The Centre for European Reform estimates that the end of the free movement of labour has led to a loss of 46,000 workers in construction.

There’s also an argument that Britain has become a less attractive place for migrant workers (even with the SOL in place), due to endless red tape, high inflation and a pound that’s struggling to recover.

Conclusion

Government measures such as the SOL could help to resolve labour shortages in the short-term but it’s unlikely to make a long-term impact, until we can encourage more young people into the construction industry. The length of time it takes to train new entrants has to be taken into consideration too, as this means there’s likely to be a skills gap for a considerable period. The SOL is also more likely to benefit large contracting firms who have the resources to handle the red tape and additional admin, while SMEs will likely struggle.

However, there is some good news. There has been a 10% drop in the number of vacancies reported by ONS in 4Q2022 during the same period last year.  There are also signs that the industry is learning to achieve more with less labour. A recent report from T&T revealed evidence that technologies techniques are helping to boost efficiency and attract new talent – despite the total number of people working in construction falling by 10.5% since 2019 Q1, ‘construction continued to outperform the wider economy in 2022 Q4, posting an output increase of 0.3 percent on the quarter in 2022 Q4.’