UK productivity stagnates

Productivity in the construction sector is stagnating, leading to rising cost pressures and higher demand for labour, an RICS survey has found. The poll of 300 surveyors found little significant change in productivity, which was "particularly worrying as productivity in the rest of the economy is still rising".

"Low productivity has translated into building costs rising at more than twice the pace of overall inflation in the economy in the last decade," the report, written by RICS chief economist Milan Khatri, added.

The survey chimes with research from QS Bernard Williams, revealed in QS News, which found the UK has the second most inefficient construction industry in Europe.

The RICS said those polled found that labour skills were "viewed as a negative issue in terms of productivity rather than a supporting factor". The report did point to reasons for optimism as far as productivity was concerned, highlighting greater use of IT both on and off site and prefabrication. Other positive factors included better project management skills and partnering in the industry (see boxes).

The report concludes: "The picture that emerges is that much more needs to be done with respect to skill levels to raise productivity of the industry."

Low productivity has translated into building costs rising at more than twice the pace of overall inflation in the economy in the last decade

Milan Khatri, RICS chief economist

The survey pointed to a decline in the availability of labour in the last year reported by surveyors, which suggested that the import of skills from areas such as eastern Europe was unlikely to be large or sustained enough to satisfy the needs of the industry.

The surveyors polled expected falls in available labour to drop further in the next year which will combine with the onset of major projects starting, or finishing, to keep pressure on costs.

"Surveyors have identified the Olympics, Terminal 5 and infrastructure developments in London and the development of the Thames gateway as all key potential pinch points, whilst the availability of skilled trades persons and graduates is seen as a continuing worry," the survey said.

The survey found that foreign workers from Eastern European countries such as Poland were filling between 5-10% of UK vacancies every quarter since the states gained accession to the European Union last year. It adds that this imported labour has limited wage rises for manual and professional labour, with the biggest impact on the former.