Construction Supply Chain Skills Shortage Update
Joining the Construction industry for the first time in January 2024, I felt I had a lot to learn to get up to speed on the fundamental workings of the industry and build credibility with a new team. As with any new role, there is a steep learning curve that starts on Day 1, and, if you want to keep developing personally and professionally, it’s one that probably never stops again!
Recent years have seen extensive discussions about the skills shortage in the Procurement and Supply Chain profession. Each year, discussions focus on the skills professionals need to advance the profession and support their own development.
It was while considering possible trends for the next 12 months that I came across an article about the shortage of skills being experienced, not by Procurement, but in the Construction Supply Chain. It was an article written the better part of a decade ago, but much of it still rang true. The question was, “Is this shortage still being seen?” but, at the same time, what could Procurement and Supply Chain Managers do to assist if it were.
2024 – Is There Still a Skills Shortage?
Is there still a skills shortage? The answer appears to still be yes. Research carried out by Turner and Townsend into the Construction industry (2023-2024) highlighted that nearly 80% of global real estate markets face a skills shortage. This would be problematic in any industry, let alone one that anticipates a global increase in new projects in 2025 as inflation and cost levels stabilise.
In the UK alone in 2023, it was estimated that there was a gap of nearly 1 million jobs that needed to be bridged by the early 2030s to meet current demand. In addition, approximately a quarter of these roles needed to be qualified apprentices. Not only is this a sizable gap, but with an increased level of investment expected in both the public and private sectors in the next 5 years, it is critical that it gets filled to maintain the stability and growth of the entire industry.
However, it may be that the gap is actually bigger than this. Construction employment actually fell in 2023 and 2024, though there is an increase expected in the coming year.
What is Causing This?
There are a number of factors that are causing and exacerbating the skills shortage. Unfortunately, many issues highlighted in the first Procurious article in 2016 remain unresolved today.
Ageing Workforce
A recent study has shown that fewer than 20% of workers in the construction industry are below the age of 25, while over a third are over the age of 50. Many older, experienced workers retire or leave their roles by age 60 due to the nature of the work.
With fewer young people entering these professions, there’s a significant age gap, and valuable knowledge and experience are at risk.
Fewer Apprenticeships
Fewer people are starting apprenticeships in the UK, and around 50% on average don’t complete them. The apprenticeships have traditionally been roles developing skilled workers, not only for on-site trades, but for key professions such as Quantity Surveyors, Project Managers and Site Managers.
Construction also suffers from a poor perception, with fewer young people considering or pursuing roles in the industry.
Instability
Despite planned investment and available roles, many avoid construction jobs due to the industry’s instability. With low profit margins, often down at 2-3% even for large organisations, and competition for work, there is a high turnover of companies, often as high as one company linked to construction going out of business each week.
What Impact Does This Have?
Put simply, the bigger the skills gap, the fewer people there are to work on new construction projects. This leads to delays in starting new projects and halts in ongoing projects due to a lack of contractors. It also reduces productivity due to a shortage of resources.
Both contractors and clients will be subject to cost increases and budget overspend as contractors and sub-tier supply chains pay higher wages to secure labour for project pipelines. This in turn leads to projects being revised to maintain budgets (getting less for more), or a need for more investment, putting a greater burden on public finances and the stability of private companies.
Finally, fewer skilled workers on schemes can lead to a lower quality of work and reduced compliance with key Quality and Health and Safety requirements on site.
What Can Organisations, and Procurement, Do?
There are a number of strategies that organisations can use to help close the skills gap in the industry, but bridging the current gap will require a much more joined up, collaborative approach, geared towards making Construction a more appealing career choice.
Tier 1 contractors, such as Morgan Sindall (full disclosure – my current employer) can use these strategies internally, as well as to provide support to the supply chain from the point of view of Procurement and Supply Chain Managers.
1. Engage with School Leavers and Graduates
Perhaps the most critical factor to balancing the workforce is attracting the next generation of workers. Not only can employers offer traditional Apprenticeships (full time work with on the job training and development), but they also have other options for school leavers and newly-minted graduates, including:
- T-Levels – roughly equivalent to A Levels, but offering work experience that can be used as a stepping stone to skilled work or further education;
- Degree Apprenticeships – combining salaried work with further education in order to gain a degree-level qualification and industry experience at the same time;
- Graduate Programmes – have been around for a while, but can provide experience and opportunities to university leavers in key roles.
By providing an array of options, Construction companies can highlight the opportunities and benefits of a career in the industry, and help to remove negative perceptions of the industry at the same time.
2. Embed Social Value Objectives
More and more clients, particularly in the public sector, require Tier 1 contractors to provide Social Value outcomes as part of construction programs. This requirement is then passed down through the Supply Chain to ensure these outcomes are supported and delivered by all organisations involved.
These outcomes are frequently linked to spending with local organisations, contractors and suppliers in a defined radius of a site, support for and investment in the local community, and lasting benefits in the area long after construction is complete. By embedding these as key, measurable objectives in projects, it not only provides opportunities for businesses and links to schools in the local area, but also job opportunities in the industry at all stages of the process.
3. Improve Diversity
Most organisations have a formal Equality, Diversity and Inclusion (EDI) policy in place and work to ensure that this is a core part of recruitment and retention policies. However, we cannot escape the fact that Construction, as an industry, is largely dominated by white/caucasians, with the majority being male. This is especially true in senior leadership positions.
Organisations need to actively work to change this as EDI can help by bringing in new ideas and perspectives into projects, and help teams to explore different (and frequently better) ways of working. EDI policies are only half of the battle though, as competition for diverse candidates is fierce and organisations need to fully understand how to make themselves stand out from the crowd. This is something that I’ll explore in a future article.
Evolution or Stagnation
None of the ideas above are especially groundbreaking, but they would be highly effective in helping attract new people to the Construction industry, both helping bridge the skills gap and bringing in some much-needed diversity. Any industry, and the organisations in them, needed to continue to evolve or risk stagnation and, ultimately, extinction.
If you have any experience in successful EDI programs I’d be interested to hear all about them. Drop me a note in the comments!
