24th March 2016

The UK construction industry, poor productivity and your construction company

On average, productivity in the UK is 20% lower than in other industrialised countries such as the US, France and Germany. 

The UK construction industry, poor productivity and your construction company

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That means that per hour worked, the UK produces 20% less output than the world’s other major economies. This ‘productivity puzzle’ has become a significant economic issue for the country – it’s holding back economic growth and undermining the recent increase in employment.

The data suggests that the UK construction industry reflects the UK’s productivity problem. In 1997, average output per construction worker was £15,211, but by 2015 it had only risen to £15,431. Worker output per hour had only risen by 3.3% across the same period, according to Construction News. 

With improvements in technology and new methods in construction, we might have expected productivity to increase sharply in the past two decades, but the figures tell a different story. We explore why the numbers are so poor, and what the construction industry can do about it.

Improving efficiency

Productivity is a measure of how efficiently you can use your resources – in this case, labour. Construction companies can approach inefficiency in dozens of ways, including:

  • Removing obstacles for employees, such as excess paperwork or software limitations.
  • Training staff, equipping them with new skills and enabling them to complete work to the same standard more quickly.
  • Investing in plant and other types of capital to speed up on-site processes.

In a competitive industry with tight margins, investing in these areas is a big risk. With skills shortages set to worsen, many contractors are being extremely cautious about investing in these efficiency-improving measures.

With many construction companies relying on subcontractors for specialist tasks, there’s also little short term incentive to invest in training for direct employees. Most construction companies have peaks and troughs in their annual workload, so it makes perfect sense to prefer subcontractors to employees. 

Additionally, construction remains a sector where the majority of tasks require labour – innovations in automation and robotics haven’t (yet) transformed the sector in the way that they have many manufacturing industries. That means that the efficiency boosting effects of technology have been somewhat limited.

Encouraging investment in productivity

It seems that without assistance from the government, many construction companies will continue along the same path and avoid risky investments in training and technology. The government has taken several steps to encourage long term investment, such as more funding for apprenticeships and temporarily increasing the annual investment allowance to £500,000, but the current drive for austerity means that we can’t be sure how long the funding will remain in place.

What can construction companies do?

Construction SMEs may have very little money to play with. However, small-scale, well planned investments are still viable for many companies. Productivity gains can be made in your administrative processes in your back office. Speak to office staff about their current obstacles and ask them if there are any tools that could help them work more efficiently.

Many construction companies find that it’s their outdated accounting software that’s holding them back. If you’d like to automate admin processes such as CIS verification, and streamline purchase order processing and job costing, see what Integrity’s construction accounting software can do for you.Contact us to learn more.


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