Skills shortage poses greater threat than Brexit

The greatest challenge facing SMEs at present relate not to any serious dip in demand, but a continuing skills shortage, the FMB said in its latest State of Trade Survey, the first to cover the period following the EU Referendum.

The results give a snapshot of a sector reporting positive results, in contrast with some of the gloomier expectations that surrounded a ‘vote leave’ scenario. The number of businesses predicting rising workloads has softened however, underlining the importance of neither the Government nor the industry taking the state of the construction sector for granted as we move towards Brexit.

Once again, bricklayers were the most difficult trade to recruit in Q3 2016. Carpenters and joiners, supervisors, and plasterers were also hard to come by, whereas respondents found scaffolders and plant operatives the easiest to hire.

“This highlights a different potential consequence of Brexit – the possibility that we will have a less flexible workforce,” said Brian Berry, Chief Executive of the FMB. “12% of construction workers working in the UK are of non-UK origin, forming a vital part of a labour force that is already stretched.

“Given that the skills gap is only expected to grow over the next decade, it’s vital that talented tradespeople continue to come to the UK. For this reason, we welcome the Government’s u-turn on requiring companies to publish data on the percentage of foreign workers they employ. Such a move would send completely the wrong message to foreign workers currently living and working in the UK and those who might consider coming here.”

In Q3 2016, the net balance for overall workloads remained in positive territory for the fourteenth successive quarter, despite falling by 6% to +18. A third of firms reported higher workloads, down from 37%, while marginally more businesses stated lower workloads (14% vs. 13%) compared with the previous quarter.

However, the overall housing sector’s net balance fell by 4% to +18. Around 14% of respondents stated lower workloads, up from 9% in Q2 2016. Most firms (54%) reported no change in workloads.

The private new housing market’s net balance went down by 12% to +2. The proportion of firms with positive expectations for workloads decreased to 20% from 30%, while those anticipating falls in workloads experienced a marginal rise from 17% to 18%.

“Growth has softened compared to the buoyant first half of the year and some parts of the UK have gone into decline,” said Berry. “In particular, London is flat-lining which is concerning given that it is typically one of the strongest markets for construction SMEs. Our feeling is that the construction skills shortage, which we know is particularly pronounced in London and the south east, is starting to bite.”

Key statistics from the State of Trade Survey:

• Overall workloads showed steady, albeit slower, growth in the first quarterly assessment of the overall SME construction sector since the EU referendum;
• Employment rose at a faster pace compared with three months earlier;
• 59% of SME construction firms struggled to hire bricklayers and 55% found it difficult to hire carpenters and joiners;
• Over the next six months, output prices, material costs, wages and salaries are all projected to increase;
• Looking ahead to the next three months, businesses are forecasting rising activity levels, though at a much slower rate compared with the quarter.

PICTURE CREDIT: Jamain (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons