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What a difference a year makes. At the beginning of September 2007, the UK construction industry was booming, contractors were hungry for recruits and skilled workers were hard to come by 鈥� and the resulting tussle over staff sent salaries soaring.

Only 12 months have passed but extreme financial conditions have flipped the situation into reverse. Whereas last year salaries jumped 7.7%, this year they rose by a meagre 2.1%. In some cases, they have even dropped 鈥� for example senior buyers were paid 2.4% less this year than last.

Cause and effect

So, what exactly has caused the stagnation? Richard Buchanan of recruitment consultant Abatec believes there are simply too many candidates for the jobs available. Last year, contractors were so busy that demand for staff far outstripped supply. Since the credit crunch, however, contractors have experienced a sharp drop in workload.

鈥淭he knock-on effect of less work is lower demand for staff and pressure to cut costs,鈥� says Buchanan. The result is employers are offering to pay much less than before. 鈥淟ast week, one of my clients offered a lower rate for a site manager鈥檚 job than he would have a year ago,鈥� says Buchanan. 鈥淲hereas last year he would have offered 拢38,000-40,000, this time he offered 拢35,000. He said, 鈥榯he simple fact is, I can鈥檛 be 100% sure of having a full workload next year鈥�.鈥�

And Buchanan says a candidate was happy to take the job. This demonstrates a wider trend, where employees are willing to settle for lower salaries. Buchanan says that people are becoming so desperate for jobs they will accept tougher conditions as well as lower pay. 鈥淟ast week one of my candidates from Bournemouth who used to be in the housing sector applied for a site manager鈥檚 job in Swindon, to which he would have to commute for two hours.鈥� Also, more people are staying put in their jobs, and this too pushes down salaries.鈥淭here is some nervousness among employees so they are not moving jobs as much,鈥� says Mark Bevan, business development manager of contractor Shaylor Group.

鈥淎s candidates are wary about moving jobs, employers know they can pay at a lower level without pushing people away,鈥� explains Greg Lettington, director at recruitment company Hays.

Another factor affecting the recruitment market is contractors鈥� reluctance to commit to long-term staff, because they are uncertain about how much work they will have in future. In the early nineties worry about high costs and low workload meant companies shied away from taking on permanent workers. Colin Woodward, director of recruitment firm Contract Scotland, recalls: 鈥淲hen the market started to recover after the last recession, there was a trend towards hiring more freelance staff, because of the lack of confidence about the recovery being sustainable.鈥�

This is happening again, says Buchanan. 鈥淲hile we鈥檝e experienced a slight drop in demand for permanent staff, the contract market is picking up. People are more comfortable recruiting temporary staff, as they can guarantee work for the duration of a new project.鈥�

While many of the jobs available are being filled by contract staff, the pool of permanent staff is getting wider. The glut of candidates is coming in particular from housebuilders, which have made thousands of redundancies in the past few months. 鈥淎 mass of people who used to be employed in the residential sector has flooded the market,鈥� says Buchanan.

Bevan has noticed this, too. 鈥淲e are receiving CVs from people with a housebuilding background on a daily basis,鈥� he says.

It has got to the point, adds Buchanan, where clients are asking him not to send them candidates who used to be in the housing sector, as they have too many applicants with those skills.

Vaughan Burnand, chief executive of Shepherd Construction, explains why this might be. 鈥淭here has been a surge of people from the housing sector,鈥� he says, 鈥渂ut the real quality people probably haven鈥檛 been released yet.鈥�

Bevan adds that housebuilders do not necessarily have the skills for working for a general contractor. 鈥淲e are open minded about hiring them, but there are different ways of working in the two sectors, for example, procurement of subcontractors and suppliers is done quite differently in housing.鈥�

鈥淎lso,鈥� he adds, 鈥減eople from a housing background are used to very generous bonuses, which means their salary expectations may be higher than is normal in a contractor.鈥�

What next?

With demand for staff trailing behind supply, what will happen to salaries in the coming months? Woodward says: 鈥淭he drop in salaries is actually a correction, in that the rates being paid before were based on an inflated market. The figures on offer now are more realistic and sustainable.鈥� He does not anticipate that salaries will start to rise again until next spring.

Greg Lettington is more optimistic. He refers to the public sector and projects such as Crossrail and the Olympics as evidence that the workload, and hence the recruitment market, will pick up soon. 鈥淒emand for staff in these areas is not going to fall, and to get the right people you have to pay.鈥�

This will leave candidates with a background in schools, hospitals, infrastructure, power and government work in a position to command high salaries.

Buchanan says the economy is much stronger this time than it was during the last recession. 鈥淭hen, salaries dropped quickly. For example, an engineer earning the equivalent of 拢30,000 today was being offered 拢15,000,鈥� he says. Because this is not happening this time, he believes that salaries will recover much more quickly.

He adds that by now contractors may have made the necessary cutbacks. 鈥淭hey may be recruiting again by the end of the year.鈥�

Site agents/foremen

Last year the salaries of site managers went up 5.5%, whereas this year they rose by just 2.7%, on average. This is mainly because the pool of available site managers has become larger owing to redundancies at housebuilders, so employers have more choice about whom to hire. Contractors are also being cautious about recruiting site managers. However, the fall has not been as dramatic as in some other job areas. A source in one recruitment firm says this may be because many big projects are still continuing, and contractors still have a lot of work in hand. In six months, when there are fewer construction sites around, site agents鈥� salaries may fall more dramatically.

Quantity surveyors

QS salaries have gone from a rise of 7.9% last year to a rise of just 0.8% this year. Again, this is the result of an influx of QSs from housebuilders and the fact that contractors may not be hiring as many new QSs as before, now that work is drying up. 鈥淎lso, many QSs in their mid-twenties were commanding extortionate salaries in the housebuilding industry,鈥� the source says. 鈥淣ow they are looking for work from contractors, but they don鈥檛 have enough experience to be worth the very high salaries.鈥�

Buyers

Buyers鈥� salaries have suffered the most 鈥� last year they rose 9.9%, but this year they actually fell 0.4%. The source says this may be because contractors can do with fewer buyers, as this role can be taken on by others, such as QSs and site managers.

Estimators

Estimators鈥� salaries went from a 6.6% rise last year to 3.3% this year. The source says this may be because there are already many estimators working in contractors and they can do with not hiring any more. Also, much of their work is done at the beginning of projects, and now that many schemes are coming to an end and with not much work in the pipeline, contractors may not be hiring new estimators.

Planners

Planners鈥� salaries rose 7.7% last year and 1.4% this year. The source says this is again owing to the fact that work is drying up.

Contract and project managers

There was a small change in this category 鈥� from a 7.6% rise last year to a 6.3% increase this year. The source says: 鈥淭his may be because they are mainly employed by big companies on larger, longer projects, and these are still running, or haven鈥檛 suffered as much yet.鈥�

Engineers

The rate at which engineers鈥� salaries have been rising has fallen from 8.2% last year to 1.9% this year, once again because of the fall in workload. Another reason may be that last year many engineers were going freelance because they could command higher salaries that way. Simultaneously, contractors may be hiring more contract engineers because they are uncertain of their future workload.

Health and safety professionals

Salaries slumped from a rise of 8.5% last year to a rise of 0.5% this year. The source says this may because the number of jobs in this area can be cut back, as the role can be taken on by other professionals or outsourced.