Where have all the workers gone? Construction’s shrinking talent pool

The construction industry is facing many barriers to recovery right now. Whether it be materials shortages or soaring energy costs, the industry has some stiff challenges as it tries to respond to a bounce-back in demand – albeit we are yet to feel the full impact of the worsening situation in Ukraine on the UK economy.

But while these sudden and dramatic shocks understandably cause concern, perhaps a more persistent headache with no immediate remedy is that companies find themselves fishing for workers in a shrinking pool of talent. Just as workloads are ramping back up after two years of covid-related disruption, employers cannot now find the right people with the necessary skills to fill essential roles.

Figures from the Office for National Statistics (ONS) show a historically high number of job vacancies in the industry. Over the past 12 months, the average number of vacancies in construction for each over-lapping quarter is 38,000. This is higher than for any period since ONS records began in 2001.

Inevitably, a shortage of supply leads to wage inflation. Building’s contractors’ salary survey for 2022, run in conjunction with Hays, found that salary increases and demands for staff intensified in the latter half of 2021 as lockdown restrictions eased and workloads boomed thanks to pent-up demand. Payroll firm Hudson Contract found subcontractors enjoyed their biggest ever December pay packets in several regions of the country. Meanwhile, the ONS released data in January showing that weekly pay growth in construction was the highest out of all sectors in June 2021, having been the lowest 12 months earlier. Consultants are experiencing similar inflationary pressures, with many reporting that poaching talent has become rife.

We must bring more people in from the bottom as it’s not sustainable to keep increasing people’s wages and fighting each other for them

Iain Parker, Alinea

“People are beginning to say: Look, this is just crazy, we can’t carry on like this,” says Iain Parker, partner at Alinea Consulting. “We need to deal with this inflationary point around people.

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“We must bring more people in from the bottom as it’s not sustainable to keep increasing people’s wages and fighting each other for them.”

It seems as if every part of the construction sector is feeling the pain of staffing shortages to some extent. Of course, industry leaders have been complaining of skills shortages for years if not decades, but it appears the problem is more acute now than ever before. So, what has changed? And if the talent pool has shrunk, that raises the question: Where did everybody go?

Building will be delving into all of these issues over the coming months as part of our Every Person Counts campaign. We will be analysing the many causes and consequences of construction’s people problem. We want to hear about the challenges you are facing in recruiting and training people in the current environment. We also want to look at what employers need to do to up their game. And just as importantly we will be looking beyond individual companies and focusing on ideas and initiatives that can be applied sector-wide to finally unleash construction’s full potential with a skilled, diverse and productive workforce.

Shocks to the system

Before specifically looking at the pandemic, it is worth remembering the previous big shock to the recruitment landscape: the impact of Brexit. Gaelle Blake, a director at recruitment firm Hays, says any discussion of the current skill shortages needs to take account of the large numbers of construction workers who have returned to EU countries in recent years.

She says: “We all know anecdotally how good a lot of the EU workers were, particularly on the construction side – they were less visible in design – and now places like Germany are paying better and there are fewer restrictions on working.”

Research by the Construction Industry Training Board (CITB) shows the number of non-EU workers in construction fell 9% to 280,000 in 2020, although it is interesting to note that the proportion of non EU-workers in the sector’s workforce stayed broadly the same at around 13%.

Brexit and new immigration rules have radically changed the way employers think about recruitment and we will be analysing the ongoing impact of restrictions and red tape in future coverage.

But while many of the consequences of leaving the EU could be predicted by employers, the effects of the pandemic are different in that practically no one saw them coming. For example, one impact Blake has noticed in the pandemic is more people taking early retirement from the industry, perhaps due to covid-19 health concerns and a soaring housing market.

Blake says: “You’re seeing this play out particularly in areas such as quantity surveying and civil and structural engineering. They have decided to take early retirement – their property values have gone up”.

This view is backed up by ONS data showing that there are now 600,000 fewer people working in the UK economy as a whole than before covid. This is thought to be partly due to older people retiring earlier, but also because of younger people staying in education longer and more people suffering from long-term ill health.  

Demand outstripping supply across different professions and trades could also be linked tto he idea of the “Great Resignation”, which has received a lot of media attention over the last year. It refers to people in all sectors of the economy using the lockdowns to reflect on and reprioritise their lives. This has led many to switch jobs, pursue an entirely different career or scale back work commitments. It is a very real phenomenon in construction too.

Towards the end of last year recruiter Randstad published the results of a survey of 6,000 people that showed 69% were feeling confident to move to a new job in the next couple of months, and those in construction were among the most confident. At the time Victoria Short, CEO at Randstad UK, said: “The Great Resignation is here, and job loyalty is a thing of the past. Very few people moved jobs during the pandemic – [they are] the ‘missing quits’. A lot of people who’d wanted to quit just hadn’t, and that led to a deluge of resignations. Another factor is burnout. Some teams have been running too hot for too long.”

Philip Watson, head of design at architect HLM, says he has noticed a particular lack of fully qualified architects with up to 10 years’ experience: “They’ve just disappeared. Where have they all gone? I don’t get it.” But he suggests the answer could have its roots in the last recession, when the numbers of architecture students dipped. Add to that the “leaky pipeline” of architects dropping out mid-career, disillusioned with low pay and long hours and the disappearance of this cohort of architects starts to make sense.

Watson says he personally knows of three or four people in the profession who have quit to do something completely different with their lives since the covid outbreak, all for work-life balance reasons. One of them left to set up a gutter-cleaning business because it was “less stress and more money”.

Whatever the reasons for the shortages, there appears to be no end to them in the medium to short term. Deloitte’s latest survey of sentiment among chief financial officers revealed that persistent labour shortages are top of their list of risks to business, behind the pandemic, climate change and high inflation. The fact is that we are now in an employee-led recruitment market, and that has many consequences for employers.

Employees now dictate the terms

Applicants for jobs now hold the balance of power when they get to the interview stage. Companies are reporting that interviewees are asking far more questions about flexible working conditions, steps taken to ensure diversity and inclusion in the workplace and firms’ record on environmental, social and governance (ESG) issues.

Blake at Hays says: “The firms that are getting all the best people now will be those that are very clear on their employer value proposition – it’s not just flexible working, but also about being very strong in terms of their ESG and being very value led in terms of equality, diversity and inclusion.

People have had a bit of time to think and reflect and they ask ‘why I am doing this process?’

Erland Rendall

“Those who are in the mindset that this is an employer-led market and treat interviews like an old-fashioned exercise and grill people, basically asking ‘why should we take you on?’ are going to be missing a trick.”

Blake believes employers need to be far more proactive in telling construction’s story around “saving the world” and helping make the UK reach its net zero carbon goals in order to attract a generation who care passionately about these issues and want to work for an employer with similar values.

Erland Rendall, director of Artorus, sees the pandemic as accelerating a trend towards a greater desire for retaining knowledge through work, as opposed to being content to carry out “process-based jobs”. This is being driven in part by technology.

“People have had a bit of time to think and reflect and they ask: Why I am doing this process? What value does it deliver?” says Rendall.

As an example, he says that modern methods of construction often allows more decision-making and autonomy and a greater awareness of what you are manufacturing than traditional construction site working. “You don’t get that on a traditional construction site; there is little or no retention of knowledge – often construction workers wouldn’t know what they are working on,” he says.

Offering this kind of retention of knowledge, creativity and autonomy is important now because people are much more likely to have several different careers in their lifetime and jump from one industry to another to find the knowledge and satisfaction they seek.

The sector’s use of technology is arguably a key factor in persuading people to jump ship and take advantage of knowledge roles in construction. Graham Harle, chief executive of Gleeds, says the industry has in the past been “slow to adapt” but that it needs to attract people from the digital field, such as data analysts. 

The desire for flexible working, in terms of hours and location, has also been much publicised. Blake makes the distinction between roles such as site engineers, which require workers to be on site most of the time and those that are more office-based. “If you are a surveyor, or architect, or services engineer, for example, you don’t need to be there all the time, and I think what has changed is people don’t want to be in offices all day.”

Two years [since the pandemic began] is long enough time for people to shift their whole perspective of life

Suzannah Nichol, Build UK

Suzannah Nichol, chief executive of Build UK, says: “Two years [since the pandemic began] is long enough time for people to shift their whole perspective of life. If we had only worked from home for six weeks or so, we would all be back doing a five-day week; I’m fairly certain of that.”

Nichol points out that flexible working can also be introduced on site roles. Build UK last summer published the results of four pilot projects, carried out with Bam Nuttall, Bam Construct, Skanska and Wilmott Dixon, co-designed with Timewise and backed by Barclays and by the CITB. It trialled various models, such as staggered start and finish times, flexi-day approaches, home-working for desk-based roles and allowing site workers to finish when their day’s work is complete rather than for their contracted hours. It made a number of recommendations for ways of implementing flexible working. 

Nichol says: “Everybody said flexible working on the front line of construction couldn’t be done, but the pandemic proved it can be. You’ve got to be more organised, clear in your contractual conditions, and also organised in your delivery, design and efficiency on site.” She adds that this will help the industry improve diversity as well, as it will attract people who want to work differently.

The clear message is that firms will miss out on skills if they do not make an effort to foster a flexible working culture.

Talent wars

Many in the industry believe the public perception of construction remains a huge problem, particularly as the competition for talent is not just between construction firms but also against every other sector that faces similar shortfalls post pandemic.

The CITB brought out a report in January looking at this issue of perceptions, and it found those held by insiders and outsiders to be markedly different. Its headline finding was that outsiders – those who do not already work in construction – have limited knowledge of what the industry can offer, as well as having negative perceptions about its culture and behaviours.

Pervasive negative perceptions include the prevalence of manual work, jobs requiring a certain amount of physicality, the need to work outdoors in poor conditions and the industry being male-dominated.

Its survey of people outside the industry, including those looking for work, found that only 30% felt a job in construction was for someone like them, and many felt other industries to be more attractive than construction.

The report notes that these perceptions do not generally match the reality, arguing that many roles are office-based and, unlike the stereotype, the workforce is increasingly diverse. So one of the CITB’s objectives is to make sure more accurate information about the industry is easily available to the wider population.

These findings seem to chime with industry insiders’ views and experience.

Parker of Alinea says: “I just don’t think we do ourselves justice by way of advertising the fantastic schemes or the technology that’s been brought into construction.” He says negative stories about health and safety failures have helped to create a “general view that the construction industry continually lets you down and makes mistakes”.

Parker believes this is not helped by the “chaotic, unorganised and fragmented view of the industry [that] comes across to the public” as there are multiple bodies and voices and no overarching “voice” of the industry.

Blake at Hays thinks construction’s disparate nature, split as it is into blue and white collar roles, is related to its failure to speak with one voice. She says: “I don’t think construction has told a good story about why people should join.”

Gleeds’ Harle says: “We’ve got to show how wonderful the industry is; we’ve got to work more with schools and universities – and show that people can have long-term careers and it’s not just all muddy building sites.”

What next?

The skills crisis throws up many hotly debated issues, but in the end they all boil down to what amounts to a huge business risk. Take the warnings around mass resignations post pandemic: one that really hits home is the cost impact that additional movement in the jobs market will have on UK plc. Research by Oxford Economics found that it takes recently hired professional workers 28 weeks to reach full productivity, which it calculated costs £25,200 for each employee.

The other obvious risk is that projects slow down or stall. Aecom last month reported London contractors turning down work due to spiralling costs, including labour spend. Harle says the amount of money in the public and private sector construction pipeline means a lot is at stake. While the shortages are not affecting project delivery yet, he says, what will happen six to nine months down the line is a worry: “Failure is not an option. We have to attract people into our business and we have got to look at the way we are training people.”

There are few who would disagree. Everyone we spoke to ahead of this week’s launch of Every Person Counts said the industry cannot continue its old ways, that new approaches have to be found and action taken. They all spoke passionately about the need for investment in skills, reform of training and education, better routes to entry for young people, cross-sector co-operation – and, above all, full-scale culture change. It appears that now shortages are causing real pain, there is a growing consensus that effective solutions have to be found urgently.