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Construction bosses dampening inflation with sub-inflationary payrises, according to new industry survey

17 Feb 2023

Gavin Mason

Gavin Mason


As inflation rates continue to make headlines, a new report has revealed that construction firms are not awarding pay increases to staff beyond the current rate of UK inflation, suggesting that a wage-price spiral is unlikely to add to inflationary pressures in the construction market.

To read the Q1 2023 Market Intelligence Report in full click here.

Focusing on the final quarter of 2022, the survey has been conducted by leading independent property, construction, and infrastructure consultancy Pick Everard. Using its multi-disciplinary connections, it questioned consultants, clients and contractors from across the industry, with no respondents confirming pay rises ahead of inflation.

Two thirds confirmed that company pay rises have been lower than the nine per cent headline inflation rate. However, the survey also showed that 62% of those polled did not believe this will affect staff turnover, with the findings indicating that job security was being prioritised over income growth.

Elsewhere, the Market Intelligence Report revealed that 60% of consultants do not expect turnover to increase in 2023, with just 15% of the belief that gross margins would improve.

Gavin Mason, director at Pick Everard, said: “This report provides independent research into supply and demand within the construction industry. Our general view is that the industry appears to be in a position of equilibrium, and we do not find evidence of inflationary pressure from within the sector.

“From a commercial perspective, it is an optimistic start to the year. Inflation is not showing signs of converting into a wage-price spiral, which gives us confidence that interest rate increases have peaked and that there will be scope to start reducing rates by the middle of 2023. We expect the annual rate of inflation to reduce after April 2023, giving positive signs that investment in construction will look more enticing by the summer.”

Regional business confidence and project commissions were also scoped out, following nationwide industry peaks experienced during Q1 2022. Respondents in the North, London and the South appeared to have greater expectations for 2023, when compared with the Midlands and Wales.

Nearly 70% of those polled in the South revealed they were more optimistic in supply chain expectations this year than during Q4 2022. Increased workloads were noted in London and the South East from Q2 to Q4 last year, with decreases in Scotland cited over the same period.

Last month, the CITB published its CSN Industry Outlook - 2023-2027 report, revealing that 225,000 construction workers will be needed to fix employment gaps by 2027. In response, Pick Everard asked its respondents to identify the main causes of skills shortages. The key finding was that pay conditions and lack of training opportunities were considered 85% more relevant than the ability to access non-UK workers, suggesting that Brexit hasn’t been a big detriment to labour shortages in the UK.

The report highlighted ways in which the skills shortage can be tackled, and the measures and opportunities being offered across the UK to address the problem.

Gavin added: “Industry wide labour shortages and the skills gap have a direct impact on clients’ ability to deliver projects of all scales efficiently. This negatively affects time, cost and quality metrics, while limiting the ability to employ internal delivery teams such as project leaders and project managers at all levels. At Pick Everard, we seek to overcome these challenges, with 7.6% of our workforce working at apprentice, sponsored student or graduate level, operating above industry benchmarks.“

Collaboration is key to overcoming our joint future challenges, by providing a workforce that can effectively deliver better together and meet future industry demands.”The report concluded with an analysis of the Passivhaus standard, with its adoption into future projects backed as key a way of delivering energy savings and build towards construction’s net zero future.

Pick Everard employs more than 650 staff across its 15 offices, providing a range of project, cost, and design consultancy services. To read the Q1 2023 Market Intelligence Report in full click here.