As The Government doubles down on housebuilding targets and land and planning policy reforms gather pace, public and media interest is gradually turning to perhaps the most complex barrier to overcome in scaling up production – the size of the workforce.
As part of a major article in the Financial Times, Cast’s Mark Farmer provided commentary on some of the features of the current labour market, including the link to migrant worker dependency, high levels of self-employment and the importance of more stable pipelines of the construction industry to plan against.
Cast is continuing its commitment to Driving Industry Change through identifying practical ways to improve efficiency and productivity of delivery. We are also helping to establish the new innovative NHBC Skills Hubs programme referenced in this article as a means of accelerating the training of key under supplied trade workers.
Read the transcript of the article here:-
Friday 13 December 2024
FINANCIAL TIMES
FT BIG READ. PUBLIC POLICY
The Labour government dreams of kick-starting a housebuilding boom to turbocharge economic growth, but the construction sector relies heavily on migrants to plug the chronic gap in trained workers. By Delphine Strauss and Anna Gross
George Sweeney strides across the site of a partially constructed 27-storey apartment block in Bermondsey, in south-east London, merrily greeting the construction workers he passes.
The 17-year-old says he was the only teenager in his class at secondary school to do a construction apprenticeship last year. In mainstream education “you’re pushed down the uni route”, he adds. “People don’t understand there are qualifications you can get while earning money and building skills.”
Sweeney is archetypal of the apprentices Sir Keir Starmer’s government, which has pledged to build 1.5mn new homes in 5 years, wants to see flooding into the workforce. But Labour’s dreams of economic growth depend on plugging chronic skills gaps in sectors from cyber security to construction.
The teenager is part of a dwindling group: despite the efforts of successive governments, apprenticeship starts have fallen by over a third over the past decade from 520,600 in 2011 to 337,100 in 2022- and the declines are sharpest among those aged 16 to 19.
In the meantime, businesses are relying on foreign workers to fill those roles. On site in Bermondsey, where heavy packages are being flung from one worker to another, a Polish scaffolder in his 30s estimates that around 80 to 90 per cent of the 250 workers come from overseas, mainly eastern Europe. Especially in the summer months, it is incredibly hard to find bricklayers, carpenters and groundworkers, he says.
Such shortages could represent a political dilemma for Starmer, given that he has also made it an imperative for the government to bring down net migration. This is because new data, published last month, showed that the post-pandemic surge in immigration had been even larger than already thought. The revised official count shows that net migration peaked at a record 906,000 in the year to June 2023 and is still running much higher than historical norms.
Accusing the former Conservative government of conducting an “experiment in open borders”, the prime minister said in a speech after the figures were released: “You cannot separate this failure from their refusal to do the hard yards on skills, on welfare reform… clearly, the vast majority of people who entered this country did so to plug gaps in our workforce.”
The dynamics at the Bermondsey project highlight a tension in Starmer’s promises to voters. His government says it will slash net migration by identifying sectors that are “over reliant” on overseas hiring and making employers’ access to visas contingent on providing more training for homegrown talent. Starmer suggested that these plans could be accelerated, promising to publish a white paper “imminently”.
However, plans to train more home-grown workers have yet to take shape. Skills England, the new body meant to ensure a fresh flow of skills into the workforce, so far exists only in shadow form, as a nascent unit within the education department.
Meanwhile, ministers are trumpeting plans to “get Britain building again”. Angela Rayner, deputy prime minister, this week set out planning reforms that include mandatory targets for councils to ramp up housebuilding and “turbo- charge growth”.
Tim Balcon, chief executive of the Construction Industry Training Board (CITB), estimates 250,000 new workers are required to deliver projects that are already in train. A further 159,000 would be needed to meet the govern- ment target of 300,000 homes a year. “If we train as we currently do, we won’t get anywhere near that number,” he says.
Mark Farmer, chief executive of Cast Consultancy, who led a government review of the construction workforce in 2016, says migrants are “doing the legwork UK workers don’t want to do”, but that they did not have the qualifications needed to replace the skilled, experienced British-born workers reaching retirement age.
For now, a slump in housebuilding and wider construction is masking the scale of the problem, he adds. But if activity picks up, he warns “we’re going to have a real problem building at scale, to quality, without horrific wage inflation and mistakes being made.”
Boosting the UK’s skills supply is at its most acute in sectors like construction, a field dominated by self-employment and informal, word-of-mouth recruitment.
Most employers are small contractors who do not feel able to commit either to training an apprentice or to sponsoring visas, though they readily hire migrants already in the UK.
But employers in almost all sectors will feel the effects of the recent tightening of visa rules, which includes bans on one- year masters students and care workers bringing family to the UK, and a sharp increase in the fees and salaries employers must pay to sponsor skilled workers.
Net migration fell by 20 per cent to 728,000 in the 12 months to June, thanks in large part to the restrictions – a figure still seen as too high across parliament. No political party is arguing that migration on the scale seen in recent years is the answer.
“It’s unsustainable,” says Brian Bell, a professor at King’s College London who chairs the independent Migration Advisory Committee that advises government. “There are real strains on our ability to manage housing and infrastructure.”
The MAC is currently conducting a review of the use of visas in engineering and IT the first step in the govern- ment’s broader plan for the committee to identify sectors that rely too much on overseas hiring, and then work with Skills England to boost training instead.
Bell and other labour market economists say that, depending on policy choices, net migration could eventually settle at an annual rate of around 300,000-350,000-higher than the UK has typically experienced in the past – without any big overall effect on wages or productivity.
But they reject the argument that high immigration is necessary to bolster an ageing workforce and inject dyn- amism into the economy. The rapid growth in the UK’s population since 2021 has boosted the workforce and the size of the economy, but GDP per capita – a better measure of living standards was still below its pre-pandemic peak in the second quarter of 2024.
“Having more people doesn’t generally make [the average person] richer,” says Alan Manning, an LSE professor and a former head of MAC. He argues that if immigration routes are designed to ease labour shortages in lower-paying sectors, they are more likely to drag down average productivity in the econ- omy as a whole than to improve it.
Analysis by the Office for Budget Responsibility shows that migrants who arrive in the UK in their twenties and match UK average earnings generally contribute more to the public finances over their lifetime than a UK-born worker on the same salary because the UK does not pay for their schooling and healthcare in their early years.
But the fiscal impact varies depending on migrants’ earnings and how long they stay in the UK. As researchers at Oxford university’s Migration Observatory note, all official assessments of the net impact of particular migration routes on public finances show it to be “relatively small”.
The Treasury has tended to look favourably on migration because the short-term boost to GDP allows the government to borrow more while staying within their fiscal rules, says Madeleine Sumption, director of the Migration Observatory.
But debt and interest payments eventually catch up with the govern- ment, and a bigger population needs more infrastructure. Even the boost to the working-age population in an ageing society eventually fades, as migrants who settle in the UK also get old. “There’s a Ponzi scheme element to it, you don’t want to do that forever,” Sumption says.
At best, migration could “somewhat temper” the ageing of the population- unless it continued year on year at “astronomical” levels, says Bell.
While migration cannot change the course of the economy as a whole, it can make a big differ- ence in easing sectoral labour shortages. This applies to lower- paid areas where UK employers often struggle to recruit, such as care and hospitality, as well as areas such as IT where salaries are high but specific technical skills are often in short supply.
Britain’s biggest skills deficits are in these technical areas. Only 10 per cent of working-age adults have achieved a Level 4-5 qualification – higher education certificates that are usually tech- nical in nature and sit between A-levels and an undergraduate degree-com- pared to around 20 per cent in Germany and 34 per cent in Canada.
Around a third of vacancies in 2022 were attributed to skills shortages, up from 22 per cent between 2013 and 2017. These figures were highest in construction, at 52 per cent, followed by manufacturing and IT, at over 40 per cent. Skills England described this as “a fundamental risk to delivering the government’s housebuilding, green and infrastructure commitments”. Strolling across a vast building site of low-cost houses run by Gleeson Homes in Nottinghamshire, site manager Rod Latham says there’s now a “massive dearth in homegrown talent”.
The more arduous and exposed the labour, the harder it is for him to find workers. Below-ground brickwork, essential to a building’s foundations, is the worst, he says. Latham has a group of around nine men who fly in from Lithuania to do the work for 10-day stretches and then return home. “Nobody seems to want to do it any more,” he says.
The sector is attempting to make progress. Last month, the government announced that it is working with the CITB to create 32 housebuilding hubs that offer fast-track training to areas that need it most, with apprenticeships that can be completed in up to 45 per cent faster than traditional schemes.
Balcon, the CITB chief executive, says these hubs would provide “sharp, focused training” to get people on site quickly, compared with the current system where only half of apprentices finished their course.
Government plans for more flexibility in the apprenticeship levy, which requires large employers to pay 0.5 per cent of their wage bill to fund training, would also help, he argues, adding that smaller employers would be more willing to support training focused on the skills needed in their business.
However, one Labour MP in the north of England, who asked to remain anonymous, accused his party of being “woefully underprepared” when it came to skills policy and says it had not presented any significant new ideas to tackle workforce shortages.
Tom Bewick, a visiting professor at Staffordshire university who is writing a book on Britain’s skills policy dating back to the 1880s, dismissed Skills England as “just another quango”, a non-departmental public body funded by government. He argues that attaching it to the Department for Education amounts to the same kind of central government “power grab” seen in skills policy for decades, instead of devolving skills planning to local bodies.
He points out that, in England, the government only devolves 4 per cent of the £20bn it spends on post-compulsory education and training.
Decentralised models have proved successful in countries such as Germany and Switzerland, which have managed to reduce skills shortages in recent years by allowing local regions to determine what jobs were needed and incentivise local employers to tailor training and apprenticeships accordingly.
“As a nation, we haven’t been very good at getting local stakeholders involved in the skills agenda”, says Imran Tahir, an economist at the Institute for Fiscal Studies, arguing that Labour had not presented a clear vision for how devolution will be achieved.
Starmer’s party has previously committed to giving mayors new powers over skills and employment training and support, bolstered by long-term funding settlements.
For the construction sector, training takes time. Even if the party’s work to join up skills bodies and data streams succeeds, it would take years to start feeding through to labour supply, he adds. “Migration is going to have to be used to fill these gaps in the short-term.” Industry leaders point to a deeper problem, however. Better training and flexible migration rules will not be a panacea for a sector that struggles to offer stable, attractive careers for more fundamental reasons.
Even before the salary requirements rose, construction employers rarely used skilled worker visas. Most non-UK nationals working in the sector will have arrived by other routes; as refugees, students, family members, through EU free movement or by irregular means.
Farmer, the construction consultant, says that while architecture or survey- ing firms would sponsor visas for professionals, “a major structural barrier to either skills or migration as a solution is that half the site-based workforce is self-employed… The industry’s preference is pay-by-the-day labour.”
He argues that the main reason for under-investment in training is the sector’s extreme cyclicality. To overcome this, “the government has to give the industry a stable pipeline, with a commitment to infrastructure projects that are not used as political footballs”.
New investments in roads and rail, schools and hospitals could all create an opportunity for the government to make the provision of training places a condition of procurement, he suggests. Jonathan Portes, an economics and public policy professor at King’s College, London, argues that the government’s stated aim of linking migration policy with long-term training plans is at best a soundbite and at worst, an idea doomed to failure.
“I’m sceptical,” he says.
“Both in skills and in migration, you want flexible systems that allow the market to pull people in…. without
people in Whitehall doing 10-year planning.”
