During the recession it appears the construction industry’s “Productivity Conundrum” has once again raised its head creating questions that our industry has yet to satisfactorily answer.

According to the Office of National Statistics, during the period between the first quarter of 2008 and 2014 the UK’s GDP dropped by around 0.5% whilst employment grew 3% and the hours we worked increased by 3%. This essentially means we've seen a fall in the productivity of our nation by something in the region of just under 4% per job and just over 4% per hour.

This has lead economists to start to question why people didn't lose their jobs in this time period. Common understanding of how recessions work is that as the economy dips people lose their jobs as businesses cut out the unnecessary bloat they’re built up during the good times, what then happens is productivity increases per person and leads to the recovery becoming established and then more people gain jobs.

Economists are referring to this as the Productivity Conundrum – so we need to have a look at what happened in the construction industry during that time.

At the beginning of the recession the construction industry seemed to become less productive, although it’s hard to compare apples with apples because after 2010 the office for National Statistics changed the methodology they use for working out construction output.

Survey results demonstrate that jobs and hours remained about the same until 2013 whilst construction output had slumped during recession through to 2012 which combined means the productivity of the construction industry abruptly dropped.
The firsts signs of the recovery in the construction industry could be seen in late 2012 by which time output per job rose over 4% at the same time that output grew by only 1% from Quarter 3 2012 to Quarter 4 in 2013.

CITB Research and Development Operations Manager Lee Bryer commented: “There was significant slack in construction.
“By and large contractors tried to retain staff, with the figures indicating that employment didn't drop as low as output but hours went down.

“After the initial fall there were a fairly steady number of people in the workforce but working fewer hours.

“That slack is picking up now and people are working more hours. That is why we will see more of a lag in the increase in output feeding through into new jobs.”

In the construction industry (and in most of the rest of the economy) ever since 2011 output per job has increased quicker than output per hour with output per job now just over the levels of 2011 but where output per hour still has some way to go before attaining the same levels.

Construction is a notoriously difficult industry to work on from a data perspective because there are so many different segments to the data to think about, for example refurbishing is much more labour intensive than developing new property, and we all know the finances were such in the recession that there wasn’t much demand for new properties. On top of this there are other knock on impact from the general lack of finance including equipment not being available.

Plus you can’t tell what’s happening onsite as the quality of management has a dramatic impact on productivity as well as factors pertaining to each project (after all each construction project tends to have unique circumstances).

The Office of National Statistics indicates that employers have managed to keep hold of staff during the recession because wages have fallen or have been stagnant despite inflationary forces.

That being said, it’s not very conclusive, however it’s fairly difficult to say exactly why, with roughly the same level of employment the productivity of the industry has decreased, it’s something that’s been seen across industry sectors – but due to the data changes with the Office of National Statistic in 2010 there are extra complications when trying to determine exactly what’s been going on.