13 September 2017

Construction Growth Slower In Second Quarter as Recruitment Difficulties Remain

Results of the second Build UK State of Trade survey for 2017 show that construction output and new enquiries continued to rise during the second quarter, albeit at a more modest pace than during the preceding three months.

The survey, which was undertaken with Glenigan, found that the industry anticipates further modest growth in workload, as 40% of contractors expect their workloads to rise in 2017 Q3 and 26% of firms expect their output to rise over the next 12 months.

Overall labour availability continues to remain a concern, with 24% of firms reporting that the recruitment of skilled labour had been more difficult than during the previous three months. A lack of required skills was the biggest barrier to recruitment, cited as an issue by 61% of those firms with difficult to fill vacancies.

The labour availability issues has impacted on contractors’ business performance, with 15% saying that labour shortages had resulted in the late completion of work and 14% reporting that it had prevented them bidding for work.

Furthermore, recruitment difficulties appear to have contributed to rising labour costs. 52% of firms report that their labour costs rose during the second quarter and 71% report that they were higher than a year ago.

Firms have also seen widespread increases in material costs with 60% of firms reporting higher material costs during the second quarter of 2017. The rise in both labour and material costs has resulted in 60% of firms reporting overall building costs increasing.

In contrast to the widespread rise in labour and material costs, just 24% of firms report a rise in tender prices during the quarter. This appears to reflect competitive market conditions and contractors efforts to absorb rising input costs through productivity improvements. Certainly, the rise in tender prices has not lifted margins, which were unchanged on both the previous quarter and against a year ago.

The full report can be found on the Build UK Website.