Skills and costs create a ‘ticking time bomb’ for construction

57% of building contractors reported that private new housing output rose during Q1. Photo: David Holt
57% of building contractors reported that private new housing output rose during Q1. Photo: David Holt

The skills shortage and rising labour costs were said to be a ‘ticking time bomb’ for the construction industry, as the latest Construction products Association trade survey shows the industry growing for four consecutive quarters for the first time in six years.

 

Construction activity rose for the fourth consecutive quarter in Q1 this year, the Trade Survey found.Firms across all areas of construction saw increased output including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.

 

CPA economics director Dr Noble Francis said this indicates that activity will continue to rise throughout 2014.

 

But national chair of the National Federation of Builders Paul Senior warned: “Higher labour costs and a lack of available skills are a ticking time bomb that needs to be defused urgently otherwise, for many SMEs, the premiums attached to the cost of simply building will become unsustainable.”

 

The survey showed 57% of building contractors reporting that, on balance, private new housing output rose during Q1 compared with 20% in 2013 Q4, while 47% of firms said tender prices rose in Q1 versus only 2% in 2013 Q4.

 

Dr Francis said: “Unsurprisingly, private new housing was the key driver of construction activity,” adding: “Tender prices rose in Q1 but any boost from this is likely to occur when the resulting work hits the ground later this year.”

 

However cost rises in Q1 were a key concern, with 77% of building contractors reporting that overall costs rose. This included 89% of firms experiencing rises in material costs and 50% of firms having to pay out more for labour costs, much higher than the 7% of firms reporting the same thing at the start of the 2013.

 

Another key issue was technical skills availability. Dr Francis said: “61% of building contractors reported that it was difficult to obtain bricklayers during Q1 compared with 41% in Q4 and only 10% one year ago.  A further 28% reported that they had difficulty recruiting carpenters.”

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