It’s not just construction materials that are experiencing record inflation – wage inflation is driving up the cost of projects across Ireland and the UK.
Wages in the construction industry are up 15% year on year. With wage inflation across all sectors inside the EU at just 3.8%, that puts the construction industry in first place for the fastest growing pay packets.
But why is wage inflation in the construction industry so high?
How Labour Shortages Are Driving Construction Wage Inflation
A severe shortage of labour continues to threaten the construction industry.
In the UK, construction vacancies have increased by 80% since late 2019, and by 2023 there will be more than 100,000 unfilled roles in the sector. 77% of construction firms say they are experiencing difficulty in attracting labour.
In Ireland, wet trades are among the most in demand. In the UK, 65% of construction firms report having the most difficulty sourcing bricklayers and carpenters.
A shortage of construction workers is nothing new. After the global financial crisis of 2008, apprenticeships slowed, and the construction labour market was already pressed to find workers.
When Covid hit in 2020, apprenticeship training centres went into hibernation, which cost the industry almost 2 years worth of new workers.
In the latest PwC Construction Market Monitor, 82% of those surveyed in the construction industry said that the availability of trades has decreased.
Following Brexit in 2016, many in the construction industry report that they are “very concerned” about restrictions on the freedom of movement of labour between Ireland and the UK. Irish and UK firms both report that they continue to struggle around staff mobility between countries.
How Increased Demand for Construction is Driving Wage Inflation
When measures to stop the spread of Covid shuttered sites everywhere, the already-pressured backlog of demand for construction projects only grew.
In the UK, 45% of construction firms say they expect to be under even greater demand for work next year than they are today.
To meet this demand, construction firms need staff, and more than 50% of construction firms say they expect to increase their headcount in the next 12 months – up from just 4% in 2020.
But with so many projects coming online, firms are forced to poach workers away from other companies with the promise of better pay.
This leads to an effective bidding war for labour, with firms being forced to pay higher and higher staff costs just to get a project over the line.
What Will Happen Next
In Ireland, the government has set the target of 10,000 new places on apprenticeship courses by 2025. If this comes to pass, this will be a great relief to a labour market under huge pressure.
The UK plans to recruit an additional 53,000 new construction workers each year.