Can foreign workers end the sector’s labour shortage?

The government has made it significantly easier to employ certain construction workers from abroad. How does the scheme work – and can it really plug the gaping hole in the industry’s workforce?

Inflation has pummelled the construction industry in the past 12 months.

Last year, the value of all construction work increased by £23bn, or 15 per cent, from 2021 – causing a spike in insolvencies, as firms struggled to pass on rising costs.

While material prices have been a major driver of this inflation, a lack of workers was also a significant – and still-growing – problem.

The labour shortage has been sharply accentuated by the UK’s departure from the EU, which meant new immigrants from the other 27 member nations no longer have an automatic right to work in the country. Instead, under the UK’s points-based immigration system, workers from those countries must now be sponsored.

In most cases, companies sponsoring a foreign worker have to pay significant visa costs and prove that the worker speaks English to a certain level. The job must also pay at least £25,600 a year and have a Regulated Qualifications Framework (RQF) value of three or greater – meaning it involves skills equivalent to an A-level or higher.

Now the government has announced that five construction professions will be added to the Shortage Occupation List (SOL) – making it much easier to sponsor foreign workers for these roles. These were bricklayers and masons; roofers, roof tilers and slaters; carpenters and joiners; construction and building trades; and plasterers.

But does the high rate of self-employment in construction undermine these plans? And – with other building jobs still not on the list – do the reforms go far enough to solve the labour crisis?

Too little, too late?

While the proportion of construction workers who come from the EU has grown since 2014, this has been from a “low base” of just 6 per cent, according to the government’s Migration Advisory Committee (MAC). Despite the increase, construction firms have been unable to fill vacancies with overseas workers.

Build UK said the average number of job vacancies among its specialist contractor members was now 14, while for its main contractor members it was 145. Meanwhile, the Civil Engineering Contractors Association has been surveying its members on labour shortages since 2011 – when only 3 per cent said there was an unsatisfactory number of skilled workers. In 2022 that figure had risen to 70 per cent – the highest proportion on record.

The shortage is not only causing labour costs to rise – which is not necessarily a bad thing, at least for workers. It is also hollowing out industry capacity – dragging down the UK’s construction output and costing firms money through project delays.

Morgan Sindall spoke for all contractors when it told its investors last month: “Increased trade and labour costs have continued to place upward pressure on total build costs, which in turn has placed increased strain on the stability of the supply chain.”

As the construction industry continues to grow, the problem is forecast to deepen. The Construction Industry Training Board said it expected the industry to need an additional 225,000 workers to meet UK construction demand by 2027, an average of 45,000 workers per year until then.

The Construction Leadership Council (CLC) has, meanwhile, said that 30,000 new workers will be required to create every extra 10,000 homes in the future, with the most severe shortages being bricklayers, plant operatives and site managers.

Industry lobbying

It is no surprise, then, that the industry has been lobbying the government to make it easier to hire overseas workers. In a report to the Migration Advisory Committee (MAC), which advises the government on migration policy, the CLC called for 12 construction vocations to join architects and engineers on the SOL.

When the report was published on 14 March, National Federation of Builders director of policy James Butcher said: “We are in a worse position than many other industries. The occupations we have recommended are based on a solid evidential base for the sector’s need over the next five years.”

One day later (15 March), chancellor Jeremy Hunt partially obliged when announcing his budget. (It may not be a coincidence that the announcement was made by Hunt, rather than home secretary Suella Braverman, who is known for her hardline approach to immigration.)

Having the five new roles on the SOL means builders can now employ foreign workers on salaries of 80 per cent of the “going rate” for those jobs – with exact sums for each profession set to be announced later. Hiring foreign workers in these fields will also come with lower visa application fees, and they will be eligible to work a second job, as long as it’s also a role on the SOL.

The CLC had, however, wanted a further seven jobs added to the list: steel erectors; scaffolders, stagers and riggers; road-construction operatives; thermal insulation installers; plant operatives; general labourers; and ground workers.

The MAC said it did not include the steel erectors in its report as “based on projected pay growth it is likely that this occupation’s pay will be high enough for most jobs to meet the general threshold and therefore there is little justification for a SOL salary discount, which would risk undercutting domestic workers’ pay.”

Meanwhile, the other jobs recommended by the CLC are currently classed as RQF2 and below, meaning they are not sufficiently skilled under the UK’s current immigration system. The MAC has not addressed the possibility of changing this.

The response from industry has been cautiously positive. “The government has proved that it is listening, which is a welcomed change,” said Butcher.

Patricia Moore, UK managing director of Turner and Townsend, meanwhile, said it provided “some comfort”, adding: “It is well-known that the labour supply shortage is currently a major blocker to growth.”

A self-employed workforce

But some question how effective the sponsorship model will prove in an industry with a high level of self-employment, as well as significant numbers of SMEs who may not have the money and know-how to sponsor foreign workers.

Brian Berry, chief executive of the Federation of Master Builders, says: “The concern for many small building companies will be the complexity and time involved in sponsoring a tradesperson,” although he adds that “anything that helps increase the overall supply of skilled trades will be helpful”.

Simon Rawlinson, head of strategic research and insight at Arcadis, points out: “The UK’s points-based migration system is designed for direct employment – it requires participating employers to have a sponsor licence and for employees to have an offer of a job with a sponsored employer. Thirty-five per cent of the UK’s construction workforce are self-employed and in practice it could be that the expansion to [the SOL] doesn’t have the full impact that was intended if the industry’s preferred employment model gets in the way.”

This was one of the reasons the construction roles were not already on the SOL: the MAC previously expressed scepticism about how much difference it would make. The CLC, however, was adamant that employment methods were changing.

“Since 2020, the number of directly employed people has increased and the number of indirectly employed people has decreased – the gap is widening,” it said in its report to the MAC. “It is also the CLC’s stated policy to pursue greater numbers of direct employment, as evidenced in the Industry Skills Plan.”

More to be done

For the industry, the government still needs to do more to fix the labour crisis. The CLC has suggested extending the UK’s Youth Mobility Scheme Visa from six countries to the 30 in the European Economic Area – which would give a route for young people from across the continent to come and work in Europe.

It has also suggested the government sets up a “clearing house” which could have a middleman role helping companies sponsor foreign workers from abroad, or even sponsor foreign builders itself, before hiring them out to contractors on an agency basis.

But the political winds are more likely to blow in a different direction. In fact, builders might be better off worrying about whether the five construction occupations will still be in the SOL after a year or two.

The MAC said the arguments for adding construction jobs to the SOL were “finely balanced”. It added: “It was difficult at this stage, given the speed of the [interim] review, to clearly identify the most impacted occupations.”

The body is now gathering more evidence on occupation-specific shortages, recruitment and significance, adding: “This means that some construction occupations that we recommended for inclusion on the SOL in this interim report may be removed in the full review.”

While the SOL should help provide more builders, it is not going to solve the shortage on its own.

“Going forward, there is an urgent need to develop more home-grown talent, with an emphasis on encouraging more employers to take on more apprentices and greater investment in our further education colleges,” said Berry.