Rising wages alone will not solve the construction labor shortage


Professional services within the construction and real estate industry are experiencing unprecedented wage increases and this is causing a mismatch between role and compensation levels. The question is whether the construction industry can cope and what are the effects of such unequivocal increases in a sector on construction as a whole?

Christine Scott is the Director of Development and Construction for Madison Berkeley

Professional services in construction and real estate make up about 25% of the industry according to Statista. In a UK industry of 2.7 million people, around 650,000 are construction PMs, civil engineers, surveyors and business process managers. We know they are as vital a part of the construction supply chain as more traditional construction roles. Forecasts for roles in construction and professional real estate services show numbers are expected to skyrocket by 2025.

It is well established that the lack of manpower in the construction industry drives up wages. Between February and July of this year, construction wages grew faster than the rest of the UK economy at 6.7% compared to an average increase of just 0.8% across all UK industries.

Professional services wages in the construction and real estate sector have increased by an incredible third compared to the rest of the industry at 10.2%. A good example of this is a recently qualified junior surveyor who can now earn a base annual salary of £ 45,000. Two years ago that same role would have earned a salary of around £ 38,000. Right now, rising salaries for newly qualified surveyors are causing a headache for small businesses struggling to meet these salary expectations. This causes a mismatch between salary and role level.

But the lack of supply is not just a case of the loss of foreign workers. Professional services in the construction and real estate industry do not attract new grassroots talent. There are hardly any known apprenticeship programs in the industry and certainly a less diverse graduate pool, as our clients point out. We currently have 138 vacancies in five consultants at Madison Berkeley and 12% of them are in my department. Demand is high. The Conservative government’s key policy of raising the wages of British workers in all industries will not, on its own, solve the problem of the labor shortage. We find that despite the exponential rise in wages in the construction industry, there is still a labor shortage. Professional services in the industry show that if you don’t feed the chain from the bottom up with apprenticeships, increasing wages alone won’t solve the problem.

We know that the labor shortage is stalling construction sites. If we don’t pay attention to fueling the supply chain for professional service roles, this will continue. A short-term solution in terms of labor supply for our sector is impossible. The level of qualification required to fulfill professional roles takes years. With no known apprenticeship in the professional services sector of the construction and real estate industry at this time, we are not attracting new talent to filter the chain. Currently, the demand to fill positions is so high that once graduates have completed their two years of professional practice, companies compete to hire them. As a direct consequence, wages are pushed up. We are also seeing organizations offering signing bonuses to keep people safe due to the shortage of applicants. Counter-offers are another factor in our business right now. Due to a shortage of candidates, companies faced with a staff member leaving the ship often try to keep them with a counter offer, often higher pay or more flexible work. The effect is that it excludes some professional service companies from the construction and real estate industry and causes an imbalance for consumers on a fair deal.

All of these factors fuel the economy at large and have a ripple effect. Wage increases are attractive, but apprenticeships and on-the-job learning incentives must go hand in hand with government policy, otherwise the sector will continue to struggle.

* Christine Scott is Director of Development and Construction for Madison Berkeley

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