After years of a recent recession and an overall economic slump in the U.K., things finally seem to be looking up. In 2014, the construction industry’s output was GBP103 billion, 6.5% of the total economy. The industry’s output rose in 2014 by 9.5% in real terms, the biggest increase since at least 1990.
And while this is definitely cause for celebration, the good news may be slightly tempered by the fact that an industry-wide shortage of skills, combined with a fierce war for talent, means that many companies in the construction industry may have difficulties effectively seizing the opportunity that is finally presented to them. In fact, in August 2015 this year, the U.K. industry output fell by 4.3% when it was expected to rise 1%. Many analysts are looking to the shortage of skills as a possible explanation.
The war for talent is not exclusive to the construction industry. Overall, the U.K.’s workforce will have a 3.1 million person shortfall by 2050 if the skills shortages are not addressed. However, this issue is particularly acute for the U.K. construction industry and data suggests that while teachers will be in shortest supply, this is closely followed by construction workers and nurses.
So why is the talent situation in the U.K. so much more severe within construction? There are several realities specific to the industry that may be making a bad issue even worse.
The U.K. construction market is not the only market that is growing. There is significant opportunity abroad, particularly in emerging markets. World construction markets are already at a tipping point with 52% of all construction activity taking place in emerging markets today. This is expected to increase to 63% by 2025.
Another reason why attracting and retaining talent is proving difficult in the construction industry is compensation, specifically falling salaries. The U.K. Fortune 50, which account for the GBP27.8 billion of turnover, have experienced a substantial increase in profitability, with operating profit up by more than 40% to GBP770 million. Yet despite this, the average increase was a little over 3%.
Furthermore, staff levels at the top 100 contractors grew by 6%, but the wage bill only went up by 4%, suggesting a drop in average salaries across the top 100 firms as a whole.
New Skill Set
Not only is the construction industry having trouble finding talent to fill critical existing positions and skills, but the emerging technologies that are rapidly shaping the industry will require new and different skill sets and thus pool of talent.
The advent of digital working, including BIM, with an accompanying increase in automation and offsite construction, will herald a wider shift in skill sets, argues Martin Perks, Divisional Director at Mott MacDonald:
Stakeholders are likely to become more numerous and more sophisticated and the commercial complexities more subtle, given the collaborative working involved in digital delivery. End-user expectations will continue to rise, with more voices becoming prominent in the process.
Additionally, this new skill set will be required sooner rather than later. The Construction Industry Council has been at the forefront of developing and leading the U.K. Government’s strategy for BIM and is very much behind the mandate that centrally procured public sector construction projects will be delivered using BIM by next year.
What Can Be Done
Considering the issues raised above, it is clear that the industry needs to be able to tap into all the available sources of talent. However, it appears that the industry in the U.K. may not be doing enough to create and foster that pool of talent.
The lack of focus on education and training around the built environment has contributed significantly to the current skills gap. Construction margins are infamously tight and often contractors cannot find the funds or the time for proper training. Given that the construction industry contributes more than 7% to the National GDP, it has recognised the need for more training and Nick Boles, Skills Minister, has unveiled plans to create three million apprenticeships by 2020.
While initiatives like these will undoubtedly help, the issue of education starts long before the job site. Alison Watson, Managing Director of Class Of Your Own, a social enterprise for education in the built environment, explains, “when STEM – science, technology, engineering and mathematics – subjects are at the top of the education agenda, there is little focus on introducing young people to the built and natural environment.”
Winning the War for Talent
The U.K. recognises that it needs to harness talent on a massive scale and the recently published joint government and industry strategy document entitled ‘Construction: 2025’ highlighted the need for fundamental change in how the industry is perceived by the general public and called for greater engagement of young people and society at large to help address this war for talent and related skills shortages in the construction industry.
There are many ways this is being addressed in the public sector, from improving the current position of construction in the U.K. educational curriculum and introducing young people to the build and natural environment earlier as well as more aggressively, to government-backed training programmes like the one described above.
However, these are all long-term initiatives driven primarily by the public sector. Contractors and other firms in the construction industry are fighting the war for talent right now and need to improve their position if they want to be profitable and take advantage of the improving market conditions. And in this new and evolving market, a higher salary will not be enough to attract the best industry talent and fill the ever broadening skills gap.
One critical piece to attracting talent is the comprehensive benefits offering. While each firm will most likely need a tailored solution to protect their people assets, the strategy behind this offering is critical. Employers in the construction industry need to consider a whole host of factors including wellbeing, litigation, safety and workplace injuries, absence, engagement, and presenteeism.
Furthermore there needs to be a clear understanding of how these are supported by traditional lines of insurance and where one coverage starts and the other stops. And while a comprehensive benefits strategy may not win the war for talent alone, it is certain that no talent war will be won without it.
This post was jointly written by John Roberts and Pauline Goreham of Willis Towers Watson’s U.K. Construction Practice.