Study Predicts 8.3% Rise in UK Construction Labour Costs

According to a new report, rising labour costs, driven by the continued skills shortage, are due to have a huge impact on the UK construction industry in the second half of 2023. The Construction Skills Network suggests that the sector will require an additional 225,000 construction workers by 2027 to meet the shortfall. 

The study on rising labour costs, conducted by construction cost consultancy Currie & Brown, predicts an 8.3% increase in labour costs in 2023. This figure could potentially extend project lead times by up to 50%, necessitating a reassessment of project scopes. These delays are likely to raise the total cost of some projects, affecting the profitability of construction firms and making some projects unaffordable. 

However, it’s worth noting that while the predicted 8.3% rise in labour costs is plausible given the current market dynamics, it’s by no means a certainty. Other factors could dampen wage growth. For example, an economic downturn could lead to projects being postponed or cancelled, which would decrease demand for labour and potentially keep wage growth low or even stagnant. 

Similarly, if the government reacts to industry pressure and makes it easier for skilled foreign workers to move to the UK, it could potentially temper wage growth by boosting the available supply of labour in the pool. 

If labour costs rise as predicted, it could be another complicating factor for construction firms to contend with. “Fuel prices are returning to normal and issues around supply becoming less acute, but we are still contending with the longer-term, systemic issue of skilled labour shortages,” said Currie & Brown infrastructure director John Mansfield. “This is becoming more pressing and is a growing concern for our clients.”

The convergence of rising labour and material costs could add a substantial £900m to the cost of the UK’s infrastructure pipeline in 2023. Increased costs in construction could eventually lead to higher prices for consumers, especially in the housing market, further exacerbating the cost of living crisis.

Nick Gray, Currie & Brown’s Chief Operating Officer for Europe, stressed the urgency of addressing these issues, stating, “The national infrastructure pipeline is crucial to both the economic health of the UK and improving the entire population’s quality of living through increased access to key services. Therefore, the predicted skills shortage revealed in this report should be seen as a wake-up call for the construction industry.” 

To resolve the issue, Gray joins a chorus of others who have called for a collaborative effort in training, robust project management, and stringent costs and risk control to prevent the endangerment of key infrastructure projects. 
Alex Minett is the Head of Product & Markets at CHAS, the UK’s leading health and safety assessment scheme and provider of risk mitigation, compliance, and supply chain management services. Alex has written extensively on the UK’s skilled worker shortage. CHAS clients can use the Contractor Search Tool to quickly find accredited contractors and builders across the UK.