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ONS construction output: Industry reaction

Concerns about skills shortage highlighted.

The importance in bridging the construction industry skills shortage is of huge importance, according to experts responding to the latest construction output figures.

Provided by the Office for National Statistics (ONS), the latest construction output figures were favourable in monthly, quarterly and year-on-year comparisons.

Output in June 2015 has increased by 0.9% from May, and when compared to June 2014, the rate is better by 2.6%.

The quarterly figure was similarly encouraging, with Q2 2015 (April to June) having increased by 0.2% from Q1 2015 (January to March).

Like the monthly figure, there was a bigger jump when looking at the same time last year, so Q2 2015’s construction output is 2.4% higher than it was in Q2 2014.

David Rix, Technical Director at McAuliffe, spoke about the “highly encouraging” figures.

He said: “Although we can only comment on the private and public housing sectors, the strong rise in output that we have experienced has been entirely made up of an increase in the volume of work completed.

“This is highly encouraging, though we are mindful that our clients are still very cost sensitive and competition for work remains intense.

“Unit rates for individual items of work are yet to rise, remaining at the same level as they were a couple of years ago.”

While these figures are good news for the industry, many who spoke to UK Construction Media also warned of the skills shortage as something that needs to be addressed if the industry is to blossom in the long term.

Kalpana Padhiar, risk underwriting manager and construction specialist for Euler Hermes, welcomed the news but highlighted the problems associated with skills shortages as well as the slowdown in residential output.

She said: “The increase in output levels is welcome news across the construction sector following the slowdown in Q1. However, the rate of growth is at a much slower pace than anticipated and is having no real impact on GDP.

“The slowdown in residential housebuilding is a particular concern. Following the peak in September 2014, we have seen markedly slower growth. Private housing has been the main contributor to any growth that we have seen, with public housing on a declining trend. Businesses will be looking to the Chancellor’s autumn statement for a commitment to building new homes to follow up the 200,000 promised in the spring.

“Problems also remain with sustained skills shortages continuing to drive up costs, and combined with a raw materials shortage and increasing lead times for new contracts, some businesses are still experiencing cash flow pressures.”

Concerns about skills were echoed by Gerard Murnaghan, VP EMEA of Indeed, who said that the industry has to continue to invest in skills and training.

“The industry should take heart from these latest ONS statistics, but should not lose its focus on – and investment in – skills and training,” he said.

“This applies both to those entering the workforce, to make sure they have the skills they need to flourish in the industry, and to existing employees, to equip them with the skills and knowledge they need to support maximum productivity.”

Keepmoat’s Regional Managing Director, Martin Smithurst, was pleased with growth that he expects to be “beneficial to the wider economy” but like many, he has worries about the effect that the skills shortage will have on output.

He said: “The good news for the industry is that after a slow start in the previous two months we have seen some positive growth and this will be beneficial to the wider economy.

“However, my concerns about the skills shortage remain and this is a contributing factor to the overall construction output. If we are to fulfil the government’s housebuilding ambitions, it is essential that we successfully recruit and train more young people to a professional industry standard.

“While there is some good news, it’s a mixed picture and there are some key areas that need to be addressed before we can expect to see considerable growth.”

Constructionline’s Director, Philip Price touched upon the need reduce issues with cash flow but he believes “the future looks positive.”

He said: “Given the decrease in output in the industry experienced in the last three months of 2014 and in Q1 2015, this announcement will provide renewed confidence to those concerned that the decline was a long term issue rather than a blip.

“The future looks positive. Financial markets have stabilised now the General Election has passed and the government’s move to streamline the planning process for new housing development should lead to greater activity in the sector.

“The industry now needs to improve on payment times to reduce cash flow issues for the smaller businesses that are vital to the supply chain and under continued financial pressure.”