Restrictions to immigration and work in the UK construction industry

While the case of UK agriculture illustrates an exception to the rule of ‘ending’ low skill immigration, there are many sectors in which demand for migrant workers are not being met under current immigration policy proposals. This blog focuses on the case of the UK construction sector.

This is the fifth part of SPERI’s new series on Brexit, the Conservative Majority and the UK Political Economy.

The UK construction sector has one of the highest shares of immigrants within its labour force, although the share of migrant workers varies across regions. The Office for National Statistics reports that 8% of the UK and 28% of London construction workforce are from the EU countries while the industry census by Home Builders Association suggests even higher numbers; with 18% of the national construction workforce and over 50% of London’s construction workforce comprised of EU migrants in 2017. These migrants predominately originate from Central and Eastern European countries (CEECs). The London figures are particularly significant because the region constitutes one fifth of the UK’s construction output.

According to the Home Builders Association, the housing supply in the UK has grown by 74 per cent during 2013-2017 and is expected to grow further over the next few years. Construction Skills Network estimates that a further 168,500 new jobs will be created in the industry during 2019-2023. However, a number of factors are leading to labour shortages that will be exacerbated by the increased demand. Brexit and the decision to end of free movement of labour in 2021 has already severely curtailed the flow of EU workers into the industry. Additionally, the flow of migrant workers from the CEECs has slowed as wage levels in and labour demand for the construction industry have risen in the CEECs. In 2018, the number of EU nationals working in the UK fell for the first time in eight years, which has particularly affected the construction industry.

The above factors all create serious doubts about the possibility of growth within the construction industry; leading employers in the construction sector to look for ways to address their labour needs. These factors also raise questions about the future character of the workforce and the implications for construction workers.

One main strategy suggested to address labour shortages in the construction industry following Brexit is to improve the vocational education and training facilities for this industry. Many organisations like the Construction Industry Training Board have developed strategies to address post-Brexit challenges and have created training programmes to attract the necessary workforce for this industry. Nevertheless, there are several challenges to addressing the labour shortages in the construction industry through training, as previous similar initiatives have proven.

Firstly, the training programmes are long-term solutions to labour shortages and thus require long-term commitments of the government, employers and employees. Such long-term commitment is difficult to achieve particularly for construction industry as it is project-based, geographically mobile and jobs in this sector are casual. These result in short-term relationships between employers and employees, and reduce employers’ incentives for and workers’ commitment to training.

Secondly, the UK construction industry has adopted a “low-skills-low-wages” route, which has made the profit margin in this industry low and dependent on cheap labour; which is similar to the UK agricultural sector. The dependency on cheap labour discourages employer’s investment in worker’s skills or employer’s willingness to pay higher wages for skilled workers.

Thirdly, and relatedly, “too few young Britons aspire to a job in construction” because of the low job quality and insecure working practices. In fact, the average age of UK-national construction workers has been increasing, leading to an ageing problem in this sector. Therefore, even if the training programmes for construction jobs are created, they are likely to remain unfilled unless the job quality and wages show important improvements in this industry.

Fourthly, the UK construction industry is dominated by small subcontracting firms, which have limited capacity to organise and provide firm-level training. The possibility of these firms to organise training becomes particularly low in the absence of a corporatist structure and a dual training system in the UK; especially due to low unionisation levels in this sector, where the union density decreased from 56 per cent in 1995 to 10 per cent in 2018.

As the longer-term solution of training the local workforce appears unfeasible, employers in the UK construction sector are more likely to continue hiring immigrant workers; at least in the short-term. However, there are currently no envisioned ‘carve out’ visa arrangements for the construction industry despite the demands of industry organisations, as it is the case for agriculture.

Therefore, employers in the construction industry are likely to address their labour needs through informal employment of immigrants. Indeed, informal employment will not be a new thing for the UK construction industry, which has had much higher levels of informal employment compared to other sectors. For example, FLEX found that half of the workers in the London construction industry do not have a written contract. Moreover, people from the CEECs were informally working in the UK construction sector even before CEECs’ accession to the EU. Their EU accession did not initially result in a “massive influx of foreign workers” in the construction industry. Instead, it has contributed to these workers’ “legal” employment and “proper” treatment, as mentioned by the previous General Secretary of the Union of Construction, Allied Trades and Technicians (UCATT).

The rise of informal employment of immigrant workers will make such workers extremely vulnerable to exploitation not only because of their informality but also their migrant status.  A recent report by Focus on Labour Exploitation (FLEX) shows that half of the workers in the UK construction industry work in dangerous conditions, a third do not get their payments and another third have experienced abuse. Exploitative practices are much higher amongst migrant and informal workers, with higher risks of dangerous workplace accidents, sometimes resulting in death. 

Labour regulations at both government and company levels may seem like a good solution to prevent exploitation in the first instance. Nevertheless, such regulations and their implementation at government level require significant public commitment and staff capacity. However, FLEX argues that the government currently does not have such capacity.

It is also difficult to prevent informality and exploitation through company regulation. Labour exploitation in the construction industry mostly takes place in small subcontractors of large building firms. The linkages between large firms and their subcontractors are complex and challenging to regulate, and hence prevention of worker exploitation through such measures seems impossible.

Similar to the case of agriculture, the construction industry will face important labour shortages after Brexit. This blog has discussed the possibilities in this industry, which will depend on both the labour market and immigration policies adopted by the government in upcoming years.

Read all of our posts in our blog series on Brexit, the Conservative Majority and the UK Political Economy.