Ian Anfield examines the pay trends seen in the construction industry this year
The start of 2015 displayed the highest indicator of optimism for the construction sector since February 2006.
However, with supply chain pressures, skills shortages, tough economic conditions and the insecurity of the General Election, this past year has seen an undercurrent of uncertainty rippling through the industry.
In early January, construction output remained 3.7% up on the previous 12 months. The Midlands led the way, with average regional earnings up by over 6% over the previous three months. However, the North-East only reported an increase of 1.37% and the industry prepared for a slowdown in growth from January, at least until the general election was over.
Despite short days and bad weather, February saw the sharpest expansion of construction activity since October 2014 and, apart from in the North-East of England, average pay rates held over the three-month period.
Moving on to March, and with the most uncertain general election in decades still looming, the insecurities were having an effect on the construction industry’s spending. It seems that many plans were placed on temporary hold, although all five regions showed significant growth of 7% to 8% over the past twelve months.
The April showers also brought a levelling of earnings. The North-West led the way with a 3% earnings increase, while the South-East showed a small reduction of 1.5%. April’s reduction in output was also put down to uncertainties in the run-up to the election, and the continued temporary hold on spending.
By May, pay rates were down in four out of five regions, with Easter, the two bank holidays and school holidays having had a consequential impact on earnings. Although, given the election’s result in May, output was considered to pick up again following a mood of growing optimism. Amid all the post-election talk of creating a ‘Northern Powerhouse’, earnings rose in both the North-West and the North-East, while being down everywhere else.
Many firms who had put projects and spending on hold in June had begun moving ahead again by the summer months. Annual earnings for freelance builders, for example, increased in all five regions compared with June 2014; with those in the North-East and the South-East doing best with rises of 10% and 9% respectively.
There was a big development in July’s pay statistics. For the first time in 2015, freelance builders in the North-East saw their average weekly earnings increase by an inflation-busting 5.6%, crossing the £700 threshold. This earnings leap was mirrored slightly in the North-West, with a 3.2% increase. The good news continued in the Midlands and the South-East, where the average increase was over 2%. In the South-West rates fell by 1.8%, with the average labour-only subbie earning £670 – making them the lowest earners across the UK.
August also brought a significant increase in earnings. There was a 6% rise in the South-East, North-East and the Midlands, although slightly less in the North-West, with the South-West being 3% better off. Average weekly earnings in the South-East were over £750. Elsewhere, all were on at least £650.
Earnings were unquestionably buoyant in September, with across-the-board increases for the second month running. The Midlands led the way with a 6% increase on the three previous months. In the North-West and South-East, the increase was 4%, while the South-West showed a more modest rise of just over 1%.
In October, earnings saw a considerable dip. Four of the five regions were down on the past three months, with only the North-East showing the smallest of increases at 0.11%. The South-East region was the top earner on roughly £750 a week, leaving them £110 better off than their counterparts in the South-West. However, confidence in the construction industry remains high and is still rising, so whether this is a temporary setback, or the start of an earnings plateau, will become clear over the next few months.
Overall, strong optimism and an increase in work available has been a boost to everyone in construction this year. Apart from the slowdown while the election campaign was in force, the picture has been improving.
Average earnings have increased by nearly 5% so far in 2015. The North-East has seen the biggest increases, with earnings up by over 11%. The North-West and South-East follow, both with increases of over 6%, but the Midlands is trailing with only a 3% increase. The South-West has been struggling, with a 1.3% decrease in average earnings across the year. The South-East has seen the highest average weekly earnings, followed by the Midlands, North-East and North-West, with the South-West offering the least.
Nationally, on a trade by trade basis, shopfitters and electricians and joiners earned the most, whereas scaffolders and bricklayers received the least. Across the board, average weekly earnings in 2015 have been £707, up 5% (£34 a week), which is well in excess of inflation.
We’ve been waiting a long time for better times in construction, and it’s very satisfying to hear how the construction industry’s ‘confidence level’ has surged to a 10-year high. With increased workloads in both the public and private sectors, there is strong positivity for the rest of the year ahead.
Ian Anfield MICE is managing director of audit, contract and payroll service, Hudson Contract