Skills shortages hindering construction growth

Medium-term prospects remain bright despite Q3 decline in output, says Construction Products Association

THE latest figures from the Office for National Statistics (ONS), which were released earlier this week, highlighted a decline in construction activity during the third quarter (Q3) of 2015.

Output in the construction industry was 2.2% lower than in the second quarter and 0.1% lower than a year ago, and was 4.3% lower than the pre-recession peak.

Putting the data into context, Dr Noble Francis, economics director at the Construction Products Association, said: ‘The fall in construction output in Q3, compared with a year ago, was the first annual fall since the first quarter of 2013.

‘Skills shortages in the industry have been a key issue recently and are hindering growth, especially in house building. Where skilled labour is available, wage inflation has also been a serious issue, hindering the viability of many sites.

‘In the private commercial sector – the largest construction sector, there are still many projects in the pipeline due to contracts that were signed 18–24 months ago. However, sharp rises in costs since then, due to a lack of skilled labour, have adversely affected margins and meant that many projects are on hold for the moment while contractors go back to clients and renegotiate prices.’

Dr Francis continued: ‘Overall, recovery is never a straight line and there are always a few bumps and scrapes along the way. Projects in the pipeline across most construction sectors suggest that activity in the industry will rise in 2016 and our forecasts anticipate 4.2% growth in total construction next year, driven by recovery in house building, commercial and infrastructure activity.

‘Skills shortages, however, are proving to be a key issue constraining growth for the industry.’