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The list of things that need urgent improvement in the built environment is huge, perhaps bigger than at any time since the end of WW2.
Transitioning to a low-carbon economy. Levelling up. Adapting for a digital age. Solving a housing crisis. Rethinking high streets. Reconfiguring for an ageing population. The list of priorities goes on. All point to construction.
That sounds encouraging for the industry but turning needs or aspirations into effective demand is another matter. Finding sufficient funds to pay for it all will be a stretch, although the government’s willingness to announce “world beating” plans and splash the cash has been quite remarkable of late.
But even assuming funding continues to flow relatively freely with a strong economic case made for hundreds of billions of pounds of new investment, there remain other big roadblocks on the route to building back better.
Global materials prices are rocketing. Talk of inflation is fashionable again. And, as the fog of the pandemic begins to clear, a potentially much more severe challenge is emerging.
It increasingly looks like UK construction faces a major skills crisis if it wants to deliver what is on the extensive list of priorities. The potential training bill is eyewatering after the ravages wreaked by the pandemic and the challenges created by Brexit.
The Labour Force Survey (LFS) data, which is the primary measure of the workforce, suggests that UK construction has lost a large cohort of its migrant workforce. Between the final quarter of 2019 and the first quarter of 2021 the number of those born in the EU working in construction fell by more than 80,000. The number born in other countries outside the UK fell by around 21,000.
The fall was not sudden, as the share of the UK construction workforce born in the EU has fallen by more than half since the peak in 2017. This contrasts with the more stable level of other non-UK born construction workers, suggesting Brexit is a factor.
Looking through the other end of the telescope, data provided by Eurostat on EU-born people living elsewhere in Europe, show high levels of repatriation in 2020 in some EU nations, particularly those in Eastern Europe. This supports the argument that large numbers of migrant workers returned home during the pandemic. The numbers of people born in Poland and Romania living abroad dropped very markedly in 2020 as did the numbers for other Eastern European nations that have fed the UK construction sector with skilled labour in recent years.
One obvious reading of the data is that the pandemic accelerated an existing trend that gathered pace after the EU referendum which saw more EU workers returning from rather than arriving to the UK. This is worrying. EU workers largely fed the expansion of the UK construction workforce as it emerged from recession, adding more than 60,000 between 2014 and 2017. By 2016 non-EU born workers were the majority in the construction workforce in London, with a third of the capital’s workforce hailing from the EU. This shrinking of the non-UK born workforce has many negative implications.
Firstly, it is accelerating the ageing of the construction workforce, as migrants tend to be younger than the average UK-born worker. At the start of 2021, the proportion of the construction workforce aged 50 or over hit 36%, compared with a quarter 15 years earlier.
Secondly, sources of skilled labour from abroad are likely to be harder to tap in the future. There are global skills shortages in construction, so wide choices are available to those wishing to work abroad. For EU citizens the UK will have lost its sparkle, partly because of the barriers of Brexit, but also because the currency has lost 20% of its value against the Euro since the peak in 2015 when the UK was attracting ever more European workers. Construction will now need to step up efforts to attract UK youth or find other nations outside Europe from which to recruit.
Thirdly, this drop in the workforce comes at a time when UK construction needs to ramp up the numbers in its workforce with the technical skills to adapt our built environment to fit with a zerocarbon, digital age that accommodates a far larger population of older citizens.
Wrap all this together and the UK faces a massive bill to train new recruits for construction and retrain many within the existing workforce. The CITB puts the number of new recruits needed at more than 200,000 over the next five years, but with so much disruption to the workforce, this figure could prove an underestimate.
In comparing the challenges of the past with those of the future it is important to note that for the past two decades UK construction has avoided paying the full cost of skills training. To a large extent it has been a free rider, shipping in trained workers from abroad. Importantly too, many employers rate this migrant labour a cut above much of the home-grown talent available. Importing labour attracts costs, but they pale in comparison with the tens of thousands of pounds it costs to turn a novice into a skilled trades person or professional.
If this steady flow is now not available, construction will have to find huge sums to cope with rebuilding the workforce and expanding training to build new skills in the existing workforce. Putting precise figures on how much it would cost is not easy. But rough and ready figures give a clue to the scale.
Construction training is not cheap. Estimates suggest it costs between £25,000 and £65,000, depending on the occupation, to put someone through training in construction when salary is included. Some firms find training unattractive seeing other costs in administration and loss of productivity of the existing workforce.
Turning first to the potential cost of losing non-UK workers during the pandemic, the Labour Force Survey figures suggest the industry has lost 100,000 non-UK workers. If that turns out to be a permanent gap retraining new recruits would represent a bill of around £4 billion.
Turning to the annual added costs faced by the industry if it can no longer manage to tempt EU-born workers, it is worth noting how their numbers expanded in the three years from 2014 to 2017. The LFS here suggests the numbers in the UK construction workforce expanded by 63,000 over three years. That potentially was saving the industry about £800 million a year on its training bill.
This article was taken from our Q2 Deep Insights report which you can purchase from AMA Research here, or is available for free to all Barbour ABI customers.