Firms across the UK construction industry reported growth in activity in the second quarter of 2015, marking the ninth consecutive quarter of growth, but near-term outlook is clouded by labour supply issues and rising wage costs, according to the Construction Products Association (CPA).
Building contractors, SMEs, specialist contractors, civil engineers and product manufacturers all reported rises in output during Q2, according to the CPA’s latest construction trade survey.
Growth in output was led by the private housing sector, in which 43% of firms, on balance, reported a rise in output. Increased output was also reported in private commercial, the largest construction sector, where 18% of firms, on balance, reported rising volumes of offices and retail work.
Contractors reported a decline in repair and maintenance work in Q2, reflecting a drop-off in measures installed under government schemes to boost energy efficient in recent months. The £23 billion R&M sector will be affected by this and the government’s decision to close the Green Deal last month, the CPA anticipates.
Contractors reported a broad fall in orders across all sectors in Q2, however, not just for R&M, though civil engineers, specialist contractors and SMEs reported an increase in new enquiries or orders in the quarter, whilst product manufacturers were upbeat over the outlook for sales.
However, growth in activity is being marred by the skills shortage with 50% of building contractors reporting difficulties recruiting carpenters, 49% for bricklayers and 45% for plasterers in Q2. Also, 57% of firms reported labour costs rose in Q2 compared with the previous quarter.
“Of lingering concern,” said Dr Noble Francis, economics director at the Construction Products Association. “Nine quarters of rising construction activity and expectations of higher workloads over the coming year raise the issue of whether the supply of skilled labour will meet demand. Half of contractors have already reported difficulties recruiting on-site trades such as carpenters, bricklayers and plasterers.”
Richard Beresford, chief executive of the National Federation of Builders, added: “Despite nine consecutive quarters of reported growth, and healthy order books, future growth is far from assured. The severity of the skills shortage is such that the industry will see unsustainable rising labour costs or an increasing inability to deliver work. Industry’s efforts to address skills shortages cannot take effect soon enough.”