The problem of rising salaries in the construction sector…

The first question with an obvious answer is, are salaries in the construction sector rising? And of course the follow-up question is, are pay rates rising faster than inflation?

Yes on both counts. Construction industry salaries rose by an average of 1.8% in the past year and this growth is expected to accelerate in the coming months, with 59% of construction industry professionals expecting their organisation to pay salary increases in the next year.

My first thought was this is great news; an industry that is thriving and the individuals in this sector reaping the rewards.  However there are currently widely publicised skills shortages in trade and professional skill sets (Surveying, Architecture, Process Engineering to name but a few) throughout the UK as engineers, contractors and sub-contractors start to fulfil existing project workload.

Worse still is that, this shortage of skilled labour is only likely to increase as many large scale construction projects kick off. Projects such as Hinkley Point, New Nuclear Build Power Stations, HS2, Crossrail, the continuation of the growth in building of new homes (30% growth in past 3 years, according to Mark Clare, Chief Executive of house builder Barratt Developments). It is easy to see why salaries are growing at an alarming rate.

So there is a big problem of supply and demand; and as we know, when demand exceeds supply prices go up. With a fast growing economy and an extremely competitive labour market, there are no easy answers to this challenge and the result is likely to be that as salaries increase companies margins start to decrease. So a likely result is that whilst workers in the sector will get increasingly well paid, the same workers will have to work harder to fulfil the skills shortage gap. Changes will need to be made to ensure that this thriving sector can maintain profitable.

Are you in the construction industry and feeling the squeeze because of the skills shortage? How do you think we can tackle the skills shortage and fuel this industry?

In my next blog I will be talking about what I believe can be done to address the skills shortage and keep the construction industry thriving. To find out more please contact Andy Gunby on andy.gunby@bps-world.com or 01628857317