After a busy start to the year, with a steady stream of enquiries about structural warranties, the team at Advantage weren’t even slightly surprised to read this week that the construction sector is making a very significant contribution to the UK economy.
The Confederation of British Industry, a not-for-profit membership organisation that speaks on behalf of 190,000 businesses, has unveiled a new report on the financial health of the construction industry (exactly the kind of thing that Advantage bookmarks for a little light reading!)
New research conducted for this CBI report shows that every £1 spent on UK construction creates £2.92 of value to the UK. The industry employs 2.3 million people directly – supporting over 3 million more indirectly – and construction activity contributes 6% of GVA.
The CBI states that: There is a huge opportunity to build on this, making this vital industry more productive, more efficient and more environmentally friendly. A more productive industry has the potential to deliver £30bn more in output every year. To do so requires investment. Yet with average margins at the industry’s largest firms in the red, and construction routinely suffering more insolvencies than any other sector, the money needed is hard to find.
John Hardie (the Deputy Director General of the CBI) states: Research by Oxford Economics commissioned by the CBI for this report estimates that if productivity – measured as output per worker – grew just two percentage points per year above the baseline forecast, the potential annual value of UK construction industry output could be £30bn higher by the end of the next decade: an increase of more than a fifth, without increasing costs.
To deliver this kind of growth, and to go further, the industry must climb out of its productivity rut. Virtually half of the current roles in the construction industry are classed as ‘manual’ occupations, and there are limits on how much more efficiency can be squeezed from such jobs.
Additionally, labour shortages are more likely to constrain growth in the next decade: almost a third of the workforce are approaching retirement age, with 32.3% of workers (around 765,000 people) aged 50 or older.
Proposals for a new UK immigration system mean the industry should expect some level of reduction in the availability of migrant workers to plug this gap. This challenge can be met, by channelling investment into reskilling workers in manual occupations, and scaling up the adoption of skills to make better use of technology, digital techniques and modern methods of construction. Creating this more productive, higher skilled and higher wage industry is achievable – if businesses have the liquidity and long-term financial sustainability to invest in training, technology and innovation now.
You can read the CBI report in full here.
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