Labour market: Spoilt for choice

The number of people employed in the construction industry in March this year fell to just over two million, its lowest level since 2002. At that point, about 500,000 industry jobs had gone from the 2008 peak, a fifth of everyone employed in the sector.

What a difference half a year makes. Since then, a growing economy, bolstered by a strongly resurgent housing market, has seen growth return to the sector, with construction output leaping 3.6% in just six months.

For the 550,000 managers, professionals and associate professionals working in the industry, in contractors, consultants and housebuilders, this rebound provides more than just a warm sense of security that further job cuts may be avoided.

Increasingly the reports from all sectors suggest that employees, many of whom have been too worried to move jobs in such an unsettled industry, are seeing the opportunities the new growth provides for them to move up - and out.

Employers, on the other hand, are starting to see the other side of it: rising demand for improved wages and bonuses, and the spectre of serious skills shortages in key areas.

The change is too recent for government data - which runs to June this year - to pick up in any decisive way (it shows the number of professionals edged up by 2,500 in the three months after March, a rise of just over 1%). But an anecdotal picture is starting to emerge from the different professions in the industry. So are there really skills shortages, and how are employers and employees responding?

Consultants

The market for QSs and project managers has really heated up in the last three to four months, according to recruitment firms working in the sector. The expansion drives of engineering-led consultants such as Aecom, which plans to appoint 3,000 people in Europe in the next three years, and URS, which will hire a further 700, are being replicated on a smaller scale among their pure-play rivals.

This week we’ve decided to expand our quota of year-out students. But there aren’t enough people and it’s a bit of a merry-go-round

Matt Carey, managing director at Capstone recruitment, which specialises in construction consultants, says his firm has doubled in size in the last 12 months, with demand for his services far outstripping his capacity to provide them. His biggest problem, he says, is in educating employers that demand is such that they are not necessarily going to be able to find the exact candidate they are looking for. “It’s the old problem of finding decent individuals. Employers aren’t interested in those that have been out of the game. Clients are being extremely fussy.”

Carey says the result of the rise in demand is that the remuneration that a recently chartered QS can expect from moving job, inclusive of benefits, has shifted from around £38,000 last year to £42-43,000 now - growth of more than 10%. Traditional QS firms, he adds, are starting to find themselves outgunned by developers, property agents and engineers that can often guarantee bonuses.

Ann Bentley, chair of consultant RLB, says the burgeoning commercial construction recovery is driving demand, but consultants with experience in the energy sector are also highly sought after.

Bentley says all consultants are increasing their in-house recruitment teams, with many firms facing a need to bring in the equivalent of about 20% of their current workforce each year to satisfy expansion requirements and churn rates.

In terms of specific staff, she says the demand is highest for chartered QSs and PMs with a few years’ experience, but adds that the recession has left a real dearth of such people - with many of those qualifying in 2008-9 not staying within the industry. She says: “This week we’ve decided to expand our quota of year-out students. But there aren’t enough people and it’s a bit of a merry-go-round. Everyone’s doing the same thing.”
Carey adds that of the more senior roles, it is what he calls “work winners” who are in highest demand. “QS employees suddenly have got options available - there are new firms such as Alinea and Tower 8, and they know things are getting better so they may be looking to move.”

Bentley says the recruitment market is not yet as hot as before the recession, but the supply of young staff is nevertheless worrying. “The thing that is scary is the supply side. The number of people in the industry isn’t as high as before, but the supply pool is shallower.”

Building market rating:

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Housebuilders

A number of housebuilders and residential developers have been building up capacity in the south of the UK for a couple of years. But for those working in recruitment for housebuilders, 2013 will go down as the year when the rest of the country caught up with an already strong London market.

The success of Help to Buy, launched on the back of an already-recovering market, galvanised the listed builders to firm up expansion plans early in the year. Bovis is just one example, confirming last week that while it started the year with just three geographical regions, it now has five, and is looking to have a sixth in place by the start of next year. In recent months, the listed builders have been joined by the previously hard -pressed privately-owned part of the sector, with Cala, McCarthy & Stone, Countryside, and Pegasus Homes all expanding, sparking a huge recruitment drive.

Housebuilders are saying, ‘We’ve been through four years of hell to get here, we don’t want to fall at the last hurdle by losing our key guy.’

Mark Heald, director of property and construction at recruitment firm PSD, says that, as a consequence, 2013 has been his second busiest year ever, with only 2006 topping it. “The driver has been London and the South-east for some time… but in the last year to 18 months the regions have become more positive.”

From the only activity outside the South-east being the replacement of retirees or other departures, suddenly companies are staffing up for big office expansions. In London, the demand is for development managers, technical managers and project delivery people. In the regions, where many firms are starting from scratch, Heald says the demand is for all staff across pay grades and skills sets.

He says there is a perceived shortage of applicants for key roles, despite an estimated 40% of housebuilders’ staff being laid off in 2008-9, because recruiters are not keen to employ people who have been out of the market for a number of years. This is leading to intense competition for those who have retained their jobs during the downturn.

Bovis chief executive David Ritchie says that while demand for staff is some way off the peak of 2006/7, competition for talent is growing, with pressure building on salary levels, rather than bonuses. “It’s not easy to find people. We’re hiring a lot of people and inevitably we’ve seen some inflationary pressure, particularly on frontline build and sales people.”

Commonly, senior staff are being incentivised to stay with their current firms in the wake of job offers, particularly from privately held housebuilders with fewer restrictions on the value of bonuses and incentives they can offer. “We’re seeing the return of the golden handcuffs in terms of additional packages, stakes in the business and long-term incentive plans,” says Heald. “Housebuilders are saying, ‘We’ve been through four years of hell to get here, we don’t want to fall at the last hurdle by losing our key guy.’”

Building market rating:

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Engineers

According to research by the Institution of Civil Engineers (ICE) published earlier this month, salaries across the engineering sector have increased by just 2.5% since 2010 and now stand at an average of £50,000 a year. However, the same study showed huge increases in job security and confidence in business activity.

Most of my clients accept that they need to pay more [to get the right people]

There is also some evidence that greater competition is slowly starting to push up wages. According to Greg Lettington, a director at recruitment firm Hays who specialises in placing engineering professionals, demand for engineers has been strong for over a year and is continuing to improve, adding that the trend holds across engineering sub-sectors.

This, he says, has led to significant increases in the amount that firms are willing to pay, especially for top talent in key roles. “People say that salaries are the key driver in wanting to move jobs,” he says. “Most of my clients accept that they need to pay more [to get the right people].”

The picture for graduate engineers is more positive still. While continuing to lag behind inflation, graduate salaries have risen by 6.8% since 2010 to an average of £37,002. Graduates are also seeing their salaries rise quicker as they gain experience. In 2010, salaries rose by 7.7% after two years in the profession, compared with 17.5% today.

The fact that graduate and recent salaries are rising faster than the sector as a whole can largely be attributed to a skills shortage in the sector, something that John Perkins, the government’s chief scientific adviser to the Department for Business, Innovation and Skills, acknowledged in a report published earlier this month. The government consequently set out plans to attract talent into engineering, backed by £49m of public money.

Building market rating:

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Architects

Although architects sit at the front of the supply chain and therefore should be the first to feel any upturn, their good fortune is mitigated by the latent over-capacity in the sector. So while sentiment among architects is certainly more positive than it has been for some time, there is little evidence to demonstrate that optimism is translating into higher levels of recruitment. The RIBA’s latest figures, published this week, show that despite rising workloads, a fifth of architects remain personally underemployed.

Consequently, competition for architecture roles, at least within studios, remains fierce for junior and senior professionals alike, which also serves to keep wage inflation low.

The RIBA monitors business and employment trends among its members via its Future Trends surveys. According to Adrian Dobson, RIBA’s director of practice, data from the surveys show that workload in the sector fell by 40% between 2008 and 2012 and that employment levels dropped by 30% over the same period. While the decline slowed in 2012 and levelled out from the beginning of 2013, there has been no measurable increase in employment so far this year, though October figures show workload 11% higher than the previous year.

However, looking at the data in more depth, Dobson says that there have been some indications that graduate recruitment is starting to pick up, albeit from an incredibly low base, with growth of less than 10% over the last year. “Students were the worst affected, but there has been a slight increase in students gaining employment,” he says. “People may not want to hire more expensive staff but they’re happier to hire graduates.”

It is also possible that there has been an increase in employment opportunities for architects that hasn’t been picked up by the RIBA. The Future Trends survey is sent to studios, but not to other firms that may employ qualified architects, and Dobson estimates that only three-quarters of RIBA members work in mainstream architectural practices. As Greg Lettington, a director at Hays, says: “Housebuilders have been recruiting architects. Residential is what’s featured most heavily in the last nine months.”

Dobson adds that optimism is improving and should lead to an uptick in recruitment soon. “Sentiment has been more positive since the end of 2012,” he says. “It’s definitely reached a turning point. While we’ve had upticks [in confidence] in the past it’s always died away in the autumn. This time it’s sustained.”

Building market rating:

● ● ● ● ● ● ● ● ● ○ Availability of entry-level staff
● ● ● ● ● ● ● ○ ○ ○ Availability of senior staff
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Contractors

Contractors are the last firms to see the effect when works starts to pick up. Hence the upturn in demand for staff has not happened to the extent of other sectors. With major contractors such as Balfour Beatty only fairly recently finalising major restructurings, and Carillion even now in the process of laying off 1,000 staff from its energy services division, it is a much more mixed picture than for other parts of the industry.

We’re still seeing contractors working on projects tendered and priced in a different era. They are intent on keeping their margins under control, and salaries are part of that

However, in recent weeks it appears even for contractors the tide has started to turn definitively. Jack Smales, director at construction recruitment firm Macallam, says: “From May to August it was terrible, very little work coming through. But on 5 September, when people came back from holiday, the phone started ringing again and it hasn’t stopped.”

Smales says this has resulted in companies willing to skill up and recruit in advance of winning contracts for the first time for a number of years. This is in contrast to recent years, he says, in which contractors have only been willing to bring people in once contracts are signed and sealed. “They’re recruiting in advance and from our perspective it’s a massive change.”

There is a particular shortage of experienced estimators, Smales adds, and those with specialist technical skills required by subcontractors. Duncan Bullimore, building division director at recruitment firm Hays adds that while recruitment last year was weighted in favour of commercial and bidding staff, now the demand is much more balanced between those with commercial and those with on-site and construction skills. He says a range of sectors are picking up, with commercial construction at the forefront, followed by leisure, hotels, and fit-out, but cautions that there is no return to boom time conditions so far. “We’re probably seeing something like a 10% uplift in opportunities, which is quite sizable, but it’s not a seismic shift.”

This tentative situation means it’s far too early for contractor staff to expect much in the way of rising salary offers. Bullimore adds: “We’re still seeing contractors working on projects tendered and priced in a different era. They are intent on keeping their margins under control, and salaries are part of that.” However, what has changed is that people are in demand again.

It is still, unfortunately, a relatively depressing picture for recent graduates, with employers not keen to spend the time training up starters, raising questions over whether this is storing up a new skills crisis for the future. Bullimore says: “There’s very little demand [for recent graduates]. Organisations want people with solid CVs and continuous experience. They’re trying to grow quickly, but in a lean way, and they’re not about to make excessive investment in training and hand-holding.”

Building market rating:

● ● ● ● ● ● ● ○ ○ ○ Availability of entry level staff
● ● ● ● ● ● ● ○ ○ ○ Availability of senior staff
● ● ○ ○ ○ ○ ○ ○ ○ ○ Salary/benefits inflation