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Will the skills shortage slow down predicted growth?

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The Forecast for construction is looking good… In the mid-term at least

A 13.2% increase in construction output by 2017 has been predicted, with private house building expected to play a key role in growth, according to the latest forecasts from the Construction Products Association.

The forecast has once again highlighted the need to invest in a skilled workforce to support construction in the medium-term or contractors will have to pay inflated fees or worse, turn down work due to costs.

A sharp fall in public housing is expected to hinder growth in the short-term, again this is partly due to soaring costs due to a lack of skilled labour.

Bricklayers, carpenters and ground workers are particularly scarce after the economic downturn led to changes in career, retraining and cuts in recruitment. Electricians are also in demand.

The Construction Industry Training Board forecasts that an extra 224,000 builders and other workers will be needed over the next five years if the demand for new houses is to be met. Nationally, 140,000 new homes were started in the last 12 months, 100,000 short of the requirement.

Key takeaways from the forecasts:

  • Total construction output is forecast to rise 4.9% in 2015, 4.2% in 2016 and 3.5% in 2017
  • Private house building is anticipated to rise nine per cent in 2015, 5.5% in 2016 and 3.5% in 2017
  • Public house building is forecast to fall ten per cent in 2015, 5.0% in 2016 and remain flat in 2017
  • Infrastructure output is forecast to rise 10.3% in 2015, 10.8% in 2016 and 10.4% in 2017

Dr Noble Francis, economics director, said:

“Prospects for the construction industry are very bright. Construction output is forecast to increase 4.9% in 2015 – almost double the rate of growth for the UK economy as a whole – and 21.7% overall by 2019. This growth will mainly be driven by an increase in work across the private housing and infrastructure sectors.

“Private house building is forecast to rise nine per cent in 2015 and 5.5% in 2016 as it benefits from a strong property market supported by rising real wages, increased mortgage availability and government policies.

“However, public house building activity is expected to fall sharply by ten per cent in 2015 and five per cent in 2016, due to the negative impact of cuts to social rents and the extension of Right to Buy on housing association funding.

Dr Francis continued: “Infrastructure is also forecast to be one of the key drivers of construction growth over the next five years. The government has a National Infrastructure Plan in place with a pipeline of projects across the UK worth £411 billion.

“As a consequence, we forecast that infrastructure output will experience double-digit growth each year to the end of our forecast horizon in 2019.

“Our forecast growth of 21.7% by 2019 for construction has raised a key risk regarding the lack of skilled labour. Employment in the UK construction industry is now 390,000 lower than at its 2008 peak.

“So far, the lack of skilled labour has primarily affected the house building sector. As the wider industry activity picks up, however, this issue is likely to spread across the industry. In the short-term, it is already putting upward pressure on costs. In the medium-term, the forecast growth will not be possible without significant investment in skills.”

The government’s aim is to encourage more businesses to take on apprentices for the mid to long term but are they doing enough? Have your say on Twitter or on Facebook.

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