by GK Strategy 6th February, 2017

Will the Government plug the construction skills gap tomorrow?

The Government is finally set to unveil its housing strategy tomorrow with the publication of a white paper setting out how it will support house building, including a stronger focus on building homes for affordable rent[1]. The paper is expected to cover new investment, planning reforms and incentives for property developers. However, it is likely to ignore what is arguably a larger obstacle to accelerate house building; namely, the chronic shortage of skilled labour in the construction sector.

Prior to the release of the paper, Secretary of State Sajid Javid MP, repeatedly warned that current levels of construction are “nowhere near good enough” and set out his aim to lead “major, long-lasting reform” to deliver 1 million new homes by 2020 after the perceived failure of successive governments. Whilst the rhetoric and ambitious pledges in the White Paper will be welcome, the Government’s announcements are unlikely to again fail to include requisite actions to tackle the growing construction skills gap, which threatens to derail any attempts to deliver on the goals set out in the white paper.

The scale of the skills crisis is considerable, as was outlined in some detail by the Government-commissioned Farmer Review, which set out its findings in October 2016. The report described the workforce shortages as a “ticking time bomb”, estimating that based on existing workforce age and current levels of new entrants, we could see a 20-25% decline in the available construction labour force within a decade.

More recent data from the Local Government Association has brought into focus the impact skills shortages are already having; with a record 475,647 homes having been approved by local councils but not yet constructed – 25% more than three years ago. The industry itself has also been increasingly vocal on this issue with David Thomas, Chief Executive of Barratt Developments, identifying the skills shortage as “the number one challenge for house builders”, and 66% of industry professionals surveyed by the Royal Institution of Chartered Surveyors (Rics) agreeing with Thomas’ position.

To combat the skills gap, the construction industry has increasingly turned to migrant workers to support house building, with recent figures estimating that 9% of the construction workforce are EU nationals. Following the UK’s decision to leave the EU and the ongoing uncertainty on both the future of EU workers already in the UK, and firms’ future access to European migrant workers, there is a significant danger that the existing skills gap will be exacerbated in the short to medium term. On the release of his report, Mark Farmer described the potential impact of the industry losing access to EU workers as “catastrophic”. Recent research by GK Strategy and onefourzero found that demand in Eastern Europe jobs in construction has gone up 28% since the vote to leave the EU which may fill short term gaps but will leave a longer term structural shortage if movement of labour is restricted in the future

Given the growing consensus across the industry over the immediate need to address the workforce skills gap, the predicted failure of tomorrow’s White Paper to put in place measures to do so is a significant concern and raises major questions over whether the Government’s ambitious house building targets are achievable. The growing shortage, combined with the uncertainties over the availability of migrant labour in the wake of Brexit means urgent action is required if Britain is to build its way out of the housing crisis.

[1] http://www.bbc.co.uk/news/uk-politics-38873524

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