Latest market analysis from consultant Turner & Townsend shows that UK construction businesses were operating at an average of 86.2% of capacity in the first quarter of 2018 – up 1.9% from last year.

The figure is at odds with official ONS data which reported a fall in total construction output of 0.8% during the quarter.

Turner & Townsend predict the infrastructure sector will see the fastest tender price inflation this year at 3.8% with 1.7% anticipated for building projects.

Labour cost inflation is forecast to rise by an average of 4.0% over the next 12 months across the board.

At the time of the EU referendum, 49.6% of London’s construction workforce had been born abroad.

This has since plunged by seven percentage points – the fastest 18-month decline seen in 15 years.

UK regions are relatively less exposed to this Brexodus, but face a separate skills challenge from an ageing workforce.

While the North East of England only has a migrant workforce of 5.9% – 53.9% of workers are aged 45 or over.

Paul Connolly, Managing Director of cost management at Turner & Townsend, commented: “Mounting a successful recruitment fightback has never been so important, but to do this the sector needs full-throated support from employers – beyond existing contributions through initiatives such as the apprenticeship levy.

“Contractors need to ensure that the skills initiatives and incentives are in place to attract a modern construction workforce and make sure we have the capacity and talent in the right areas.

“But it’s going to take time to tackle this demographic timebomb.

“At a project level, the industry needs to be arming itself with strategies to mitigate wage inflation and drive maximum productivity from a diminishing labour pool.

“We need to be following a pre-emptive approach, adopting lean thinking to streamline project processes from design through to delivery, and leveraging the full benefits of technologies such as off-site construction.

“Only by increasing productivity, protecting margins and attracting new talent will the construction industry be able to deliver the game-changing infrastructure projects and housing the UK needs.”

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