Building projects under threat from government spending cuts and skill shortages

A new Management Consultancies Association (MCA) report, says that the battered property and construction industries will struggle to recover from the longest recession on record. The report found that government spending cuts on public sector housing projects and the return of highly skilled migrant workers to their own countries will hamper recovery.

The report surveyed consultancies, whose clients include 90 per cent of the FTSE-100 and FTSE-250, which have a particular expertise in the property and construction sectors.
High risk of fewer jobs being combined with skills shortages
Almost half of consultants surveyed for the ‘New Norm’ report said the construction sector will not generate sufficient new jobs to make up for those that have been lost. At the same time, over half believe that the return of migrant workers, many of whom are highly skilled, to their own countries will result in a shortage of specialised labour.
During October, it was estimated that 400,000 of 1.2 million Poles in Britain are expected to leave the country in the next 12 months. The MCA report says that with such a high proportion of London’s construction workforce from overseas, projects in the capital could be under the greatest threat.
Alan Leaman, Chief Executive of the MCA said:
“We are facing a combination of reduced numbers of jobs and shortages of skills. This needs to be urgently addressed. Building projects, which have been boosted in recent years by highly skilled migrant workers, could be affected.
The New Norm in the sector could even see extensive building programmes suffering from a shortage of specialised labour.”
The timing of government spending cuts will also threaten recovery
The report also found that 90 per cent of consultants believe that spending on public sector housing projects will fall substantially as the government struggles to get the public sector deficit under control. It says that the timing of these cuts could threaten recovery.
What will the ‘New Norm’ in the property and construction sectors look like?
The ‘New Norm’ for property and construction companies is likely to be an extended period of low growth. But, the report says that this will not mean lower complexity and costs. In addition to skill shortages and government spending cuts, the report identifies the following factors within the ‘New Norm’:
  • The marketplace stays global: Few consultants expect to see these sectors retrenching into narrower, more regional or domestic markets.
  • The environment is even more important: The vast majority believe that environmental and sustainability issues will become even more important, not less, in the future.
  • Demand is easier to forecast: Perhaps the only benefit is that demand may be easier to forecast as the period of greatest economic and financial uncertainty has passed.
The outlook for UK property and construction
Despite this bleak outlook, four fifths of consultants consider the UK property and construction sectors to be quite well positioned to meet the challenges involved, and opinion is evenly divided to how this compares to the situation in other countries. The vast majority of consultants do not think that the UK will be any less attractive to inward investors.
Greg Atwood at PricewaterhouseCoopers, who was interviewed for the MCA Report, said:
“The UK property and construction sectors are more transparent than other markets, with a regulatory environment that promotes inward investment. The weakness of sterling also makes the UK attractive to foreign investment [at present].”
However, Duncan Goodwin of Diagonal Consulting warns:
“A skills shortage may develop and recovery is likely to lead to increased value of the pound against the Euro and other currencies.”
For a copy of The New Norm: Property and Construction please visit