At a glance
- A lack of skilled labour is the biggest challenge for 53% of mid-sized construction companies
- Companies are using a number of strategies to tackle this, each bringing its own risks
- Managing these risks is essential to the short-term success, and long-term sustainability, of the sector
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As a skills crisis looms, companies in the construction sector are looking at different ways to address the challenge, according to the latest Zurich research.
Zurich recently surveyed 200 mid-sized construction companies about the key challenges they face, and what they are doing to address them. More than half (53%) of respondents viewed skills shortages as the number one challenge facing the industry, and 52% believe the situation will become significantly more difficult in the next five years.
Companies are employing a range of strategies to address this challenge, but many carry added risks that brokers need to be aware of.
Over the coming months, Zurich Insider will be publishing a series of articles looking at the findings from this research, and its implications for brokers and their customers.
A perfect storm
After a period of stagnation following the global financial crisis and a UK recession, the construction sector is now experiencing healthy growth with increases in tender opportunities, projects and future orders. However, at the same time 400,000 construction professionals are expected to retire in the next five to 10 years, and recruiting new talent into the industry is becoming a challenge for businesses.
To meet rising demand in the face of falling staff numbers, it is estimated that more than 600,000 constructions professionals will be needed in London and the South East alone by 2017. This is a 40% increase on the number needed in 2014, and will require more than 300,000 new workers to be sourced. This chronic shortage of labour at a time of positive growth has created something of a perfect storm for the sector.
Biggest challenge for customers
Skills shortages were identified as the biggest challenge for companies in Zurich’s latest research. This issue is now causing problems in managing projects for 77% of professionals, with bricklayers and carpenters/joiners said to be in shortest supply.
As construction companies often tender for projects 12 months in advance, labour requirements can fluctuate dramatically, so managing projects during a skills shortage can be incredibly challenging. Once projects are due to start, recruitment becomes a crucial objective, and companies may struggle to fill vacancies without paying a premium for those skills in short supply.
Instead, some companies are employing lesser skilled workers to achieve the required numbers. This can bring additional risks, both in terms of quality of workmanship and safety standards, which brokers and their customers need to consider.
Due to their relative lack of experience and/or training, using lesser skilled workers can cause issues to arise regarding safety standards, quality of workmanship or speed of delivery. Problems such as these can require the payment of liquidated damages, result in future public and professional liability claims, and ultimately damage a company’s reputation.
“A shortage of skilled professionals increases a company’s vulnerability to risk on a number of levels,” says Stewart Walker, UK Head of Construction at Zurich.
Recruiting from abroad
With UK construction professionals in increasingly short supply, many businesses are tapping into foreign labour markets, with one of Zurich’s research participants saying: “we are looking outside the country and being careful what work we take on, so we can service the contracts we agree to.”
A project manager told the Guardian that 70 out of 100 contractors on a current project were from outside the UK.
While overseas workers often offer the right level of skill, there are associated risks that will need to be managed. Communication can be more challenging (as English may not be their first language), the methods they use might not be those considered best practice in the UK, and there may be a lack of awareness of minimum health and safety standards. Training, although potentially time-consuming, is essential when using migrant workers, to ensure these risks are identified and managed – as is adequate insurance cover.
The next generation
The current skills gap exposes a desperate need to train more local construction professionals. Apprenticeships are being hailed as central to achieving this goal, and it is hoped the Government’s recent Enterprise Bill – which commits to three million new apprenticeships by 2020 might stimulate new entrants into the sector.
Zurich’s research shows encouraging signs, with 38% of respondents planning to take on more apprentices in the coming 12 months, and 41% looking to employ other trainees.
A shortage of skilled construction professionals increases a company’s vulnerability to risk on a number of levels.”
Stewart Walker, UK Head of Construction at Zurich
This carries understandable risks due to their relative lack of skills and experience, and it is essential to have added levels of supervision and training. This can prove cost-negative at the outset but will pay dividends over time by developing a pipeline of new construction professionals who are familiar with the company’s ways of working, and are trained to the required levels.
“Ensuring that the current skills shortage is minimised across the industry is vital for the long-term stability of these businesses,” says Stewart. “However, it is very important that companies who deal with employees in high-risk environments – such as construction sites – continue to analyse the risks and take decisive action.”
Zurich’s latest research identifies the biggest challenges facing construction companies and the strategies being used to address them. With the help of this research, brokers should discuss potential issues that their customers may be experiencing, and offer risk management assistance on the approaches they might be adopting in response.
To discuss any of these issues further, or get tips on how your construction customers can manage their associated risks, please contact a member of the Zurich construction team.