Skills shortages in London biting construction sector once more

New study finds

Workloads in London’s Construction and Infrastructure continued to rise in Q3 2017, according to the latest RICS Construction and Infrastructure Market Survey, with 14 per cent more respondents seeing a rise in workloads of the quarter, with a steady pace of growth.  However, while activity in London remains steady, comments left by respondents in London continue to highlight Brexit-related uncertainties as weighing on investment decisions, and the lack of sufficiently skilled workers also remains an obstacle for many businesses.

Skills shortages have been a long running issue and now the intensification of labour shortages is biting once more with contributors, nationally, citing this as an impediment to growth. Respondents to our survey are still seeing a lack of quantity surveyors (63 per cent) as well as other professionals (54 per cent) across London. 46 per cent are also seeing a shortage of workers with specific trades, all hampering growth.

Despite government efforts to bolster the workforce and the prominence of apprentices, through an apprenticeship levy introduced earlier this spring, only 42 per cent of respondents, nationally, feel that government-funded programmes are moderately effective, with one-third unsure. The quality of the talent pipeline is insufficient as well – less than half (45 per cent) of employers who currently hire apprentices view them as a long-term solution to their hiring needs.

Breaking the rise in London’s workloads and activity down to sector level, the most growth is being seen in the infrastructure and public non-housing sectors, while remaining broadly stable elsewhere. In infrastructure, 22 per cent more contributors reported a rise rather than a fall in workloads, with a net balance of +19 per cent in public non-housing. Across London, respondents expect the rail, road and energy sub-sectors to post the most significant increases in construction output over the coming 12 months.

Despite uncertainties, a net balance of 38 per cent of respondents in London also expect activity to continue to rise rather than fall over the next twelve months. Meanwhile, 27 per cent more contributors expect employment to rise rather than fall (broadly unchanged from Q2).

Nationally, while a shortage of workers is hampering activity and profit margins, financial constraints are still reported to pose the most significant challenge, although the share of contributors expressing this view has come down to 69 per cent (from 79 per cent in Q2). Access to bank finance and credit remains by far the most frequently cited financial issue, followed by cash flow and liquidity. This likely reflects a more cautious stance by banks given cyclical market conditions and Brexit considerations.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of only +12 per cent of respondents, nationally, expecting a rise in margins over the coming year.

Jeffrey Matsu, Senior Economist, commented on the latest RICS survey data: 

“While activity in the sector has moderated, growth and growth expectations remain in positive territory. Uncertainties due to Brexit continue to weigh on companies’ investment and hiring decisions, and banks appear to be adopting a more cautious stance to providing finance. Meanwhile, challenges related to an inadequate supply of skilled labour are as pronounced as ever.”

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