Construction industry hit by ‘perfect storm’
The Government’s pledge to rebuild the UK in the post-pandemic, post-brexit world needs a healthy construction sector fit for the job. But, as BEN COOPER reports, the pandemic and Brexit are two of the reasons why construction is facing a crisis of its own – a crisis that could have major consequences for the economy of Nottinghamshire
WHEN the East Midlands Chamber of Commerce asked its members what was causing them concern for the future, the results from the construction industry were telling.
Of the business leaders surveyed, 72 percent listed problems in getting access to skilled labour as their main concern, and 68 percent said that they expected prices to rise, most of all in the cost of vital raw materials.
It doesn’t take a businessperson to know that having workforce shortages at the same time as rising costs, and falling profits, is a dangerous combination.
Anyone travelling through Nottingham city centre over the past six months will have noticed that something of a construction boom is under way. If construction companies can’t find the labourers to do the job that boom could turn to bust.
Rob Ford is director of the construction division at Nottinghambased recruitment firm Thorn Baker.
He says: “A contractor told me that of five projects they’ve handed over recently every one was late due to either labour or material shortage.
“For contractors there may be penalties which wipe out the profit, and there is reputational damage with the end users.
“It’s resulting in shops not being open on time and school buildings not being ready for children.”
The links between a new school in Nottinghamshire and a typhoon at a Chinese port might not be an obvious one. In fact, indirectly, the two are linked in numerous ways.
When a severe storm hit recently the port of Ningbo – a city with an interesting connection closer to home, as the home of one of the University of Nottingham’s Chinese campuses – the ripples were felt all over the world.
The port of Ningbo-zhoushan happens to be the third-busiest on the planet. When it shuts down, the effects run right through the global supply chain.
It was yet a further blow after huge disruptions to shipping around the world caused mainly by the pandemic, but also some rare incidents, including the days-long blockage of the Suez Canal in March.
In August when a single worker at Ningbo-zhoushan tested positive for Covid, the whole site was shut down, causing a delay that analysts estimated would take up to two months to resolve.
In the era of global trade, everything is connected to everything else.
The direct result of all this has been an exponential rise in the average cost of a shipping container. From $2000 pre-pandemic, to as much as $20,000 today.
This is one of the key root causes of the inflation we are now feeling in the shops. But there are other system-wide problems, which are being felt in the construction and associated industries as much, if not more, than in any other sector of the economy.
Steven Colaluca is the office supervisor at T&R Floor Covering Distributors, based in Beeston. He says: “It’s all hit at once. “There are shortages with people being pinged [by the NHS Covid app], raw material issues, Brexit issues, and now haulage issues. It’s all led to one big problem where getting hold of materials is much harder than it was in the past.
“At the moment prices are very volatile. They’re changing all the time. And with haulier rates going up that’s putting the cost of everything else up.
“It’s a total perfect storm. Everything has happened in one year. Nobody could have predicted it.”
No wonder the Chamber of Commerce’s members are concerned.
David Pearson heads up the Chamber’s international trade team, advising clients around the East Midlands on the best way to negotiate the global markets.
He says: “One of the challenges of shipping is about where the ships are. It takes a long time for them to move from A to B to get them back in the right place. There are a lot of things that are affecting global trade, and what we see in warehouses and wholesalers across the world. It’s a global issue that everybody’s trying to contend with.”
A firm whose experience encapsulates the rollercoaster ride that has been 2021, is Alfreton-based importer and distributor of trade goods and supplies, Permagroup.
The firm’s managing director Adrian Buttress says: “We got off to an incredibly strong start, with four consecutive record-breaking months – a first in Permagroup’s trading history.
“However, as the year progresses and construction activity continues to gain momentum, there is no escaping the material shortages and price increases that are affecting the sector.
“There’s no doubt that it is going to be a tough few months and I estimate that we’ll be into the final quarter of the year before things start to improve.
“We are already learning that a number of projects are being delayed until 2022 meaning that, while 2021 might be a challenge, we already have a healthy start to look forward to in the new year.”
If Buttress is right, there are reasons to be optimistic. But for that to happen will require another big variable to stabilise – a political pressure point that is starting to have economic consequences.
Pearson says: “From a logistics point of view there’s also what’s happened with customs clearances at the ports, which ultimately goes back to Brexit. “It is complex.
It’s all the things like Brexit, coronavirus, global international trade generally, coupled with a recovery in the economy and everything’s happening at the same time.”
“It all comes back to the simple global supply and demand issues. There is greater demand than supply.”
And there’s something else that the UK construction industry is in short supply of now: manpower.
Of the top 10 most in-demand jobs Uk-wide, three – lorry drivers, metalworking production and maintenance fitters, and carpenters and joiners – have a direct or indirect bearing on construction.
Like all recruitment agencies, Thorn Baker, which runs five offices around the UK all supplying construction firms, has been directly affected by the sudden tilting of the demand-supply balance.
Rob Ford says: “In 17 years working here I’ve never known anything like it.
“There’s a lack of availability of candidates and that’s driving huge increases in pay rates. Then that’s having a knock-on effect to our clients and contractors and how they’re delivering projects.
“There’s a lack of apprentices coming through, a lack of people being attracted to the industry because it’s cast as the blue collar workers so it’s not as attractive to some.
Factories are paying more than what a labourer will earn on site... they’re not in the rain and the cold and they’re safer
Rob Ford, Thorn Baker
“Then you’ve got other jobs that are more lucrative to do. Factories are paying more than what a labourer will earn on site. They’re not in the rain and the cold and they’re safer.”
Unless this shortage can be addressed, the Conservative Government’s post-pandemic pledge to the UK, to “Build Back Better”, is in serious jeopardy.
Here in Nottinghamshire, much of that part-political, part-economic challenge falls to the Conservativerun county council, led by Mansfield MP Ben Bradley.
He says: “I sympathise with the industry as it has been an immensely challenging time for them for all sorts of reasons. The causes of issues in the construction industry are multifactorial and are challenging but can be addressed in the long term.
“It needs the commitment of industry, the training and skills providers, central and local government to work together to help find the right strategies to tackle this.
“In the long term, we need to prioritise the sectors that need the help most and that will have the biggest economic impact by boosting the opportunities for young people to get the skills they need to work in those industries.”
In Nottingham itself the challenges of tackling gaps in the jobs market come under the city council’s portfolio for skills, growth and economic development, and its holder, Councillor Rebecca Langton.
She says that work is under way to address an apparent paradox, in that both unemployment, and gaps in the employment market have risen.
“Unemployment has risen significantly during the pandemic,” she says, “but there are also a high number of job vacancies across the city.
“We want to play our part in helping match people with the roles available and ensure Nottingham people have the skills to get the jobs currently advertised.
“Nottingham City Council is already working with over 100 construction companies in Nottingham to promote job opportunities across the city through our Nottingham Jobs service. We also offer advice and support to train and retrain for the opportunities available.”
Government action is important, whether locally or in Westminster, where industry bodies are lobbying for a raft of actions to help stimulate the jobs market, including making it easier for EU nationals to return and work. The past two years of turmoil has exposed all kinds of volatilities in the global economy. Directly or indirectly, almost every business has been affected, from the distributor to the supplier to the recruitment agents working to keep the labour markets moving and the sites fully manned.
For the next few months the whole industry will be watching for signs of some badly needed stability after so much upheaval.