About a year ago I wrote about the opportunities the UK’s strengthening economy was presenting to the construction sector, but at the same time I also voiced my concern about the growing issue of lead times.
Informal feedback from my article from across the sector suggested I was not alone with both competitors and other specialist contractor companies expressing similar concerns.
12 months on and the situation has not improved at all, with many clients still not appreciating the issue and the importance of factoring “industry resource” into their requirements. It’s a situation that is likely to get worse too.
Lead times – the time between securing a contract and being able to execute or deliver it on site – are affected by many factors but perhaps the most immediate and obvious is “supply and demand”.
All clients want immediate start dates but presently we [Aarsleff] and our competitors are probably looking at around three months ahead. In fact I know of a number of driven piling contractors that have had to turn work away, unable to meet start dates demanded by clients. This should be worrying for clients now and in the long term; not enough piling contractor capacity to meet present demand means clients will have no option but to either choose based on contractor workload, forgoing quality, experience and knowledge, or be forced to pay more to secure the contractor of choice.
To the casual observer the answer would seem quite simple – you take on more staff, buy more plant and enjoy the bucks as the orders roll in, but if only it were that simple. We all know there is a skills shortage across the entire construction sector, which means the talent, at all levels, just isn’t available on tap. The talent that is available, being in short supply, is inflating salaries, which itself is artificially driving costs up as contractors pass this on to job costings.
Take Aarsleff, for example. The company functions on three resources: labour, plant and manufacturing capacity. Plant is easy as Aarsleff, being part of a large group of companies, is able to mobilise considerable resource from across Europe. However, this plant resource still takes time to secure and re-deploy, which is of little help to the clients wanting it yesterday. We are investing in new plant across the group, but again this takes time and many companies just don’t feel confident enough to invest vast amounts of capital when the economic situation is still relatively fragile.
Manufacturing capacity is a little easier to address as investment in new technologies is allowing us to increase capacity, but like new plant, costs a lot of money in the short-term and still has a limited impact on lead times when the real issue is that of a skilled-labour shortage.
The piling sector is pretty good at encouraging new young blood into the industry, with graduate training schemes and apprenticeships, but training takes time and we have an ageing skilled workforce looking to exit the industry through retirement.
Present estimates suggest that the labour shortage will get worse before it gets better as the pipeline of fresh talent takes its time to work up the ladder and replace those ahead of it. This is a real worry for all construction companies and may well have the biggest impact on lead times.
The optimist in me sees us having turned the corner on the economy and as we move forward I am confident of sustained growth, albeit with one eye on resource. Clients can play their part through firstly acknowledging that there is a lead time issue and secondly through better scheduling, working closely with their piling contractor to ensure deployment of resource is available when they need it.
More broadly, I think the industry needs to continue to invest in the future to provide the resources that are needed, but against the backdrop of a stable and growing economy. The government here must play its part and support the construction sector through policies that ensure steady and sustainable growth avoiding the “boom and bust” economics that damaged the entire sector. Only a stable economy will allow stakeholders the confidence to move forward and prevent a sector that stagnates and which could potentially impact on the economy as a whole.
Chris Primett is managing director of Aarsleff.