Written submission from Construction Industry Training Board (ULM0026)

BEIS Select Committee inquiry on post-pandemic economic growth: UK labour markets
Written evidence by the Construction Industry Training Board

About CITB

As the construction industry’s Training Board, CITB’s job is to support the industry to have a skilled, competent, and inclusive workforce, now and in the future.

We provide vital training, apprenticeship, and careers support for construction employers and work with industry and government to tackle key skills challenges to drive sector modernisation and growth. Our commitment is to be a collaborative partner, providing practical solutions to meet the current and future skills needs of construction employers, as they help rebuild the economy and create jobs in recovery from the pandemic.

Our written evidence focuses on construction’s future labour and skills requirements; the use of technological developments; the value of direct employment; and the impact of construction’s ageing workforce.

Key Points

• Construction is one of the biggest sectors in the UK and central to the economy, employing over 2.7 million people and contributing 8% of output. As such, the industry will be key to the rebuilding effort required following the pandemic.

• The industry will need to recruit an additional 266,000 workers over the next five years to meet projected demand. The largest increases in annual recruitment demand will be for occupations such as carpenters and joiners and construction managers, along with a range of technical roles.

• The pandemic has created a perfect storm of demand where industry faced a huge shock followed by a massive ramp-up in output. This has happened at the same time the industry’s pool of labour has shrunk substantially, compounded by a loss of migrant workers.

• Job vacancies are at a record high of 49,000 in April 2022, and unemployment at its lowest level in 50 years. As a result, recruiting and developing a highly skilled workforce will be a huge challenge for the industry over the next five years.

• However, at the same time, Covid-19 is also impacting negatively on construction employers’ ability to invest in training. Apprenticeship starts ended up 10% lower in 2020/21 compared to 2018/19. More positively, early estimates indicate that 2021/22 will see the number of apprenticeship starts return to pre-covid levels across the industry.
• Covid combined with this recruitment challenge has caused two contradictory issues, the need to modernise to respond to the construction skills gap versus the ability of the industry to do so and the need to fill roles now to meet immediate demand.
• The construction sector’s approach to AI and automation is mixed, with larger companies much more ready and able to adopt these new technologies. Digitisation and wider understanding of its benefits to improve productivity, efficiency, and quality of delivery, are vital next steps for the construction industry to modernise.
• There is evidence of a strong positive correlation between construction direct employment and investment in skills development. Conversely, organisations that don’t employ enough people tend not to train enough people either. Support for direct employment therefore needs to be strengthened to improve opportunity and skills investment.

• While the proportion of over 50s in the general population is increasing, the same proportion in the construction sector is in steady decline for both the employed and self-employed. Any strategy for retaining older workers needs to be multi-layered and include changes to culture, attitudes and behaviours alongside attention to training and skills pathways and health and wellbeing.

Q1: The state of play in the UK labour market post-Brexit and the impact of the covid-19 pandemic on recruitment, skills shortages, and the growth of the labour market

How labour market growth will impact construction skills demand

1. The construction industry faces a critical skills challenge. CITB’s Construction Skills Network 2022-26 forecasts an extra 266,000 workers will be required to meet projected UK construction demand by 2026 (53,200 workers per year). If this projected growth is met, construction employment could reach a high of nearly 2.78 million workers by 2026.
    
2. We expect UK construction annual output growth to average 3.2% to 2026. All major construction sectors are forecast to experience recruitment pinch points, with private housing (3.7%), infrastructure (3.1%), and repair and maintenance being most affected.
3. However, the construction industry has, like all sectors, faced huge uncertainty since the pandemic hit in spring 2020. The easing of covid restrictions across Britain, at the start of this year, initially led to cautious optimism on industry growth. Since then, optimism has cooled with increased supply chain costs and inflation coming firmly back into focus following Russia’s invasion of Ukraine. As a result, economic forecasts for the UK are now being revised down for 2022 and 2023.
4. In absolute terms, the highest annual recruitment rates (ARR) for construction-specific occupations are for wood trades and interior fit-out (6,500), other construction professionals and technical staff (5,320), electrical trades and installation (4,230), and labourers (3,330). However, these absolute numbers tend to reflect the size of occupational category in overall employment terms.

5. As a proportion of 2021 employment levels, the industry average ARR is 2%, with most occupations having a requirement of less than 2.5% per year. The exceptions with slightly higher ARR are:

Plant operatives 3.3%

Civil engineers 3.2%

Architects 2.8%

Labourers 2.8%

Bricklayers 2.8%

Wood trades and interior fit-out 2.7%

6. All nine English regions along with Scotland, Wales, and Northern Ireland, are expected to experience growth resulting in increased demand for workers over the next five years. The ARR across the nations and regions varies from 1.2% in the South East to 3.6% in the South West. For both regions, the strongest levels of output will be in the private housing and repair and maintenance sectors. However, the occupational requirements can vary significantly. For example, the South East will need to recruit 430 wood trades and interior fit-out to meet demand, while the South West will need 2.290 wood trades. This highlights the need for skills and training to be targeted at both a regional and even local level to ensure the right skills are in the right place at the right time.

7. Entry Level or Level 1 learning is the most common construction FE qualification, undertaken by 37% of learners, followed by 32% of learners taking a Level 2 qualification. However, apprenticeships are the main source of industry recruitment at entry level. Most construction apprenticeships are at Level 2 and accounted for 54% in England during the academic year 2020/21 in line with the identified skills needs of the industry in key construction occupations, particularly construction trades. Level 3 apprenticeship starts accounted for 29% during the same period.
8. As a result of the covid-19 pandemic the construction workforce shrank by 7% between March 2020 and December 2020, but has since recovered to 3% below pre-pandemic levels. The pandemic particularly impacted the self-employed and older workers. The number of self-employed in the industry dropped by 14% between 2019 and 2021, with falls in every age group. The number of self-employed workers aged 55+ decreased by 4% over that same time.
9. The pandemic has created a perfect storm of demand where industry faced a huge shock followed by a massive ramp-up in output. This, happening at the same time the industry’s pool of labour has shrunk substantially, compounded by a loss of migrant workers, has caused a significant skills challenge for the industry.
10. According to CITB’s Employer Panel research, a third (32%) of employers report difficulties in recruiting self-employed subcontract staff, and respondents were much more likely to say that the pandemic had had a more adverse impact on older workers (over 50s) compared to younger and mid-career workers. The combination of high levels of self-employment in construction, along with an older workforce and physically demanding work, are factors that align with overall labour market trends (for example, people leaving work due to long-term ill health, worklessness among people who may have otherwise worked, and early retirement).
11. Along with the exiting domestic workforce, CITB’s Migration and UK Construction 2021 report shows the number of migrant workers in the UK construction industry fell by 8% during the pandemic in 2020. Given the significant reduction in the migrant workforce, it is important that the new Points Based Immigration System (PBIS) works smoothly for industry and responds quickly to evidence of skills pressure.
12. In the short term, the strength of the jobs market means there will be increased competition for workers. Companies that can understand and meet what workers value the most (for example, career opportunities and support for development, flexible working) are more likely to be successful at attracting and retaining new staff.
13. CITB’s latest Skills and Training research shows a drop in employer training in 2019/20 and 2020/21. Although work levels picked up from the end of 2020, apprenticeship starts In England ended up 10% lower than the number of starts in 2018/19. Early indications for 2021/22 suggest that construction apprenticeship starts are on track to be at a similar level to those seen pre-pandemic. Similarly, the overall trend in achievements for apprenticeships and further education at Level 2 and above, have declined. In 2021, achievements were nearly 14% lower than pre-pandemic levels.

Interventions to address the construction skills challenge

14. With job vacancies at a record high, and unemployment at its lowest level in 50 years, recruitment and developing a highly skilled workforce will be the biggest challenge construction will face over the next five years.

15. Over the coming year CITB’s Business Plan sets out how we are investing over £233 million to support British construction to address the skills challenge. CITB has identified three key challenges facing the construction industry that it will work with industry and government to help to address.

Responding to the skills demand

16. With an estimated 53,000 new recruits required this year, the industry needs to attract and retain a wider range of potential workers by raising the profile of construction careers. Potential entrants need a better understanding of construction, but experiences are limited or not visible because employers struggle to provide them. Construction will only meet its skill needs by recruiting its workforce from a wider pool of talent. 

17. To raise the profile of construction careers:

• Go Construct, the industry’s careers website designed and managed by CITB, provides a central source of information on construction, routes in and links to opportunities. The website saw over one million visits in 2021 and we will look to increase this by 10%.
• CITB delivered the government-funded Construction Skills Fund to provide experience and entry level training linked to live construction sites. Between October 2018 and September 2021, 21,000 individual accessed CSF with 58% from under-represented groups, 19,800 trained to be employment and site-ready and 6,100 in sustained employment. Based on this success CITB’s own onsite hub-experience model will make over 6,400 people from diverse backgrounds site-ready or a job starter. We will also provide 4,600 industry taster experiences.
• Our Ambassadors bring construction to the classroom, showcasing the industry to young people. We now have 378 active Ambassadors and are committed to reach 1,700 within two year.

18. Better pathways need to be created into the industry. Construction needs to grow apprenticeship starts which have been depressed due to covid. In addition, more than just 30% of Further Education learners need to be able to progress onto an apprenticeship or a job in construction, by ensuring learners they have the skills and experience they need. 

19. To ensure people can more easily start a career in construction:

• CITB supported over 7,000 employers with apprenticeship grants from April to December 2021, enabling them to employ over 18,000 apprentices. We will look to increase apprenticeship starts in the industry by 5% and increase completion rates to 67%.
• We are continuing to work with DfE to promote and ensure the measures we have developed with government work for the industry, including the Apprenticeship Levy ‘pledge’, Flexi-job Apprenticeships, other flexible delivery models, as well as promoting T Levels and supporting them as a route into apprenticeships.
• In partnership with government, we are developing construction Occupational Traineeships designed to transition learners from FE into apprenticeships. The first bricklaying Traineeship piloted last year saw 14 candidates successfully complete the Traineeship, with nine progressing into an apprenticeship. Our work expanding this Traineeship and rolling out Traineeships in painting and decorating, carpentry and joinery, and drylining will bring over 200 people into new Occupational Traineeships.

20. To reduce the number of people leaving the industry, construction needs to be seen as a fair, inclusive, and respectful place to work. Critically, the mental health and wellbeing of the workforce needs to be protected.  

21. To help the industry better retain its workforce:

• CITB’s Fairness, Inclusion and Respect programme of free workshops and masterclasses to help industry introduce FIR processes into their business and upskill on diversity, trained 3,000 individuals between April 2020 and December 2021. We are developing a future diversity plan to align with our 2023/28 Strategic Review.
• CITB is supporting mental health training and initiatives. This includes working with the Lighthouse Club to train mental health first aiders and instructors, partnering with the Samaritans to make mental health support accessible to small and medium sized construction employers, and establishing a commission to support apprentices. Since 2018, CITB has supported nearly 950 employers with specific mental health projects and provided funding for over 29,000 mental health courses.

Developing the capacity and capability of construction training provision

22. Mandatory core occupational skills training needs to be delivered efficiently and conveniently, with demand for and supply of training needs better understood and met at a local level. Employers face a range of challenges including complexity, cost, candidate quality, identifying and accessing provision. There are also specialist skills challenges faced by the industry in certain occupations.

• CITB is fostering greater local collaboration to ensure training supply better meets demand including supporting the development of new Local Skills Improvement Plans and devolving more levy-spending powers locally to help our 80-strong network of local employer training groups find creative solutions.
• In the nine months to December 2021, 28,500 employers accessed grants to support training through Approved Training Organisations on our Training Directory.
• To support specific skills challenges in building safety, homebuilding, and retrofit we have provided enhanced funding for training in occupations facing significant shortages in skilled people including bricklaying, cladding, drylining, and retrofit.

Addressing future skills needs

23. Industry wants to ensure employers have the training available to equip their workforce to drive growth and develop non-technical, managerial and leadership skills. Putting the right standards, competency frameworks and training in place is essential if the industry is to meet both its short- and long-term skills challenges. The construction workforce will need to have the right knowledge, skills and behaviours in building safety, net zero, digital, modern methods, and leadership and management.

• CITB’s Skills and Training Fund provides small employers up to £10,000 and medium sized employers £25,000 for leadership and management training. Last year, we supported 1,556 small and micro businesses and 98 medium business to deliver high-quality training to their employers.
• We worked with DfE to ensure Skills Bootcamps tap into employer demands, the criteria for which now incorporates Level 2 to support training for in-demand skilled trades such as bricklaying, joinery, and drylining.
• To support building safety, CITB will pilot the development of Domestic Plumbing and Heating, Dry Lining, Fire Detection and Alarms, Fire Stopping Specialist, Rainscreen Cladding, and Roofing frameworks.
• We are undertaking work to understand the impact of net zero and modern methods of construction and net zero on standards, and will continue to run commissions to find new approaches to meeting emerging future needs that could be scaled-up to address critical industry challenges. 

Q2: Artificial intelligence and technology in the workplace

24. Progress over the last ten years has been largely driven by the widespread adoption of Building Information Modelling (BIM). It is likely that more widespread digitisation, automation, and artificial intelligence will be the technologies that help the sector make the next leap forward.
25. Our research report,  A Challenge and an Opportunity: AI and Automation in the Construction Industry, revealed that the construction sector has so far produced an uneven approach to AI and automation, with larger companies and those in certain sub-sectors much more ready to adapt to the demands of new technology.
26. The research, completed before the pandemic, found that only 3% of employers said they used AI and less than 10% said they used automation or related tools such as augmented reality (AR), virtual reality (VR) or drones. The survey also found that the group of ‘early adopters’ of technology were more likely to be medium or large companies. However, the real challenge for the sector is currently not about AI possibilities in construction but rather gaining a much greater pace with the use of technology more widely.
27. Without the right conditions for innovation, demand for technology and digital skills will be steady rather than explosive. CITB research shows we have a way to go and suggests 20 years is a realistic timeframe for full technological adoption across the construction industry.
28. There is a general lack of understanding within the construction industry of how digital technology and data can be used to solve construction problems. A site and project-specific culture does not support innovation being carried forward from one project to the next, and adversarial supply chain relationships slow adoption of new methods and skills. In addition, clients and contractors face shorter-term pressures that restrict investment in technology.
29. In the short term, demand for skilled work will continue as the need for quality assurance work, for example, remains. But over the medium term, there will be an increase in demand for other roles including data analysts, software developers, technology maintenance staff and project managers.
30. Training will need to be adapted now to prepare the new generation of workers for what the industry will look like over the next 10 to 20 years. While the current cohort of workers will need additional training to develop new digital skills, with our research suggesting that 50% of the workforce will need retraining in one form or another.
31. CITB is working with industry and government to create new routes into the industry and update existing standards and qualifications to ensure new training interventions meet employers’ future skills needs. We are piloting and funding critical training interventions so that workers can access the latest training available, including digital leadership training, along with developing digital and management competency frameworks to help employers understand the training available. We also fund projects to develop awareness of offsite construction, such as the Supply Chain Sustainability School.
32. 
    Industry, through the Construction Leadership Council (CLC), has committed to define and communicate the evidence base for digitalisation and smart construction in 2023; develop future skills route-maps by 2025; and define professional career pathways with the aim of 2,500 learners being able to progress through future skills pathways by 2025.
33. BEIS is working with the Construction Skills Delivery Group to develop ways to bolster the uptake of new technologies and approaches and the skills that support this through procurement.

Q4: Employment status and modern working practices five years on from the Taylor Review

34. Direct employment is seen as an enabler of apprenticeships, digital upskilling, and competence. However, direct employment is less prevalent in construction than in any other UK industry sector, with self-employment having rapidly increased since 2008 and now representing over 35% of the whole construction workforce.
35. In the UK, there is ample evidence for a strong positive correlation between construction direct employment and investment in skills development. Conversely, organisations that don’t employ enough people tend not to train enough people either. Inevitably, this has led over time to endemic skills gaps, both at entry level (for example, apprenticeships) and among the established workforce because of inadequate investment in upskilling and CPD.
36. The decline in trade apprenticeships correlates to the growth in labour-only subcontracting and agency work. Self-employed workers have more accidents and poorer occupational and mental health outcomes. Secure employment is therefore vital to attract diverse talent, create an inclusive culture and support social mobility.
37. In contrast, direct employment delivers a highly-engaged, competent workforce, increased productivity and higher value. It is reported to overcome skills shortages, spiralling labour costs, poor productivity and quality, avoiding low uptake of new work processes and technology.
38. The CLC’s Industry Skills Plan 2021-2025 identifies that there is no simple or quick solution given the wide range of factors influencing the entrenched industry structure in the UK. A long-term, multifaceted approach is required including:

• Supportive government regulation concerning procurement, taxation, and employment status.
• Widespread use of value procurement models.
• Raising industry awareness of the benefits of direct employment and helping employers and individuals overcome challenges.

39. The construction industry, through CLC, has committed to develop recommendations to strengthen support for direct employment with a view to increasing direct employment by 5% as a share of the industry workforce by 2025.

Q5: The impact of an ageing population on the labour market

40. Nearly a quarter of the construction workforce are technically within ten years of retirement (aged 55+). The number of those age 55+ has increased consistently since the early 1990s, when they represented just over 10% of the workforce. Conversely those aged 16-24 has declined from 22% of the workforce to 10%, with the average age of the workforce moving from 39 to 42 years old.
41. The implications of the ageing construction workforce means that we would expect to lose greater numbers of workers as we move forward. CITB research undertaken in 2019 found that nearly half of the employers surveyed felt that workers leave the industry early due to either the physical nature of the industry or due to ill health or injury.
42. The creation of the industry-led Construction Talent Retention Scheme provides a pathway for people in the sector to find alternative roles so their skills and experience can be retained within the industry, as well as bringing people from outside of construction into the sector. 29,000 jobs and vacancies have been posted on the website to date.
43. The government has a strategy to help adults to upskill and create pathways so they can progress within the industry, as well as helping adults who want to enter the industry for the first time and is investing £1.6 billion through the National Skills Fund in the next 3 years.
44. This includes up to £550m to expand Skills Bootcamps which has involved close collaboration between industry and government to ensure they work, both for construction industry skills needs and to give people opportunities to develop their careers within the sector.
45. From 2025, DfE will be introducing a Lifelong Loan Entitlement as part of the Lifetime Skills Guarantee. This will provide individuals with a loan entitlement to the equivalent of four years of post-18 education to use over their lifetime. This will make it easier for adults and young people to study more flexibly - allowing them to space out their studies, transfer credits between institutions, and partake in more part-time study.
46. It is critical that these interventions are agile in responding to the changing workforce upskilling requirements of employers to ensure adequate demand and the creation of successful training pathways to keep people within industry. 

July 2022

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