Contractors' salaries in the UK have continued to inflate this year, according to the 2001 Hays Montrose/Building guide. But slowing growth in Ireland points to an industry-wide downturn in the offing …
holiday homes, swish cars and designer suits: if you haven't bought them yet, you may have missed your chance. Across the board, contractors' salaries have leaped since 2000 – assistant QSs in central London have seen wages rise 25%, sub agents in Wales command 28% more and estimators have enjoyed the largest average nation-wide increase at more than 8% – but economic growth is shuddering to a halt and recruitment experts warn that the big pay packets won't last.

The 2001 Hays Montrose/Building contractors' salary guide shows that wages in the South-west, East Anglia and Greater London have increased the most, while across the regions contract managers, buyers and assistant QSs have had a good year. But in contrast, levels in Ireland have started to fall for the first time in five years, with contract managers and senior QSs' salaries dropping by as much as 10%. Recruitment agencies say it is a matter of time before salary growth in Britain slows and companies are already looking to attract staff through non-monetary incentives.

Iain Dennis, regional director for the South-west with Hays Montrose, says despite this year's record number of vacancies registered with the agency, wage inflation in the region will not be sustainable in the long term. "I am not surprised to see that wage levels in the South-west are currently above inflation," he says. "There is a lot of work here, interest rates are low and it's a good time to invest in property and renovation works. But the increases we have seen in the South-west are not sustainable; companies can't afford a 7% or 8% increase each year."

Richard Eardley, regional director for Hays Montrose Ireland, has already started to see salary growth fall although there are still acute shortages – especially for civil engineers and staff specialising in infrastructure projects. "For the first half of this year the upward pressure on salaries was still strong. But in the last quarter that pressure has definitely eased. People are being more cautious," he says. "After five years of boom and salary peaks in 1999/2000, economic growth has slowed – therefore so has salary growth."

Recruitment consultants say the events of 11 September have already led to some companies withdrawing job vacancies. Sara Smith, a consultant with Hays Montrose in Birmingham, says: "Very recently, three major contractors have pulled vacancies because the projects they are working on have been put on hold; one of them because their client is US-based, the others because they have concerns about the slight downturn in the economy. None of them has explicitly mentioned 11 September, but the implication is there."

For Dennis, the events of 11 September have not only affected projects connected with the USA, but have brought about a phase of "risk aversion". He says: "We've noticed that in recent weeks, clients are less willing to take risks. Nobody is making quick decisions. Companies are carefully considering the impact on their business of taking people on."

Very recently, three contractors have pulled vacancies after projects were put on hold

Sarah Smith, Hays Montrose Birmingham

Simon Edbury, principal residential consultant at recruitment firm PSD Group, predicts that housebuilders will be harder hit than those in the commercial sector. "Salaries in the housebuilding market may have hit a plateau as the available labour pool has been increased by casualties from the high-profile mergers, thus dampening the inflationary effect. Whether salaries remain at this level will be largely dictated by future consolidations," he adds. "It's a simple case of supply and demand."

After Ireland, salary growth has slowed most in north-east England and Scotland, although recruitment firms are still busy. Neil Crossan, manager of construction for Hays Montrose Scotland, says there is a desperate skills shortage in the country; he estimates more than 6500 tradesmen are needed in Glasgow over the next few years as a result of the housing stock transfers expected to go through soon. There is also a desperate need for surveyors, planners and site managers. But Crossan thinks more companies are rethinking their salary and recruitment strategy as it has become untenable just to keep paying more. "There haven't been any great leaps in salary growth lately. Companies are more interested in the welfare of their staff than they have ever been. They have to offer job flexibility, a better work/life balance. Applicants want to know about career opportunities and training."

The drive to attract and retain staff through means other than money and cars is not exclusive to Scotland. James Craven, a recruitment consultant at Judd Farris in London, says cars are no longer seen as a big incentive in the capital and companies are offering new graduates extended holidays to tempt them. "Companies will throw in a travelcard as an incentive rather than a car," he says. "One symptom of the shortage is that in the last couple of years, 25 days of holiday rather than 20 has become the norm for a graduate."

Bristol-based contractor Pearce Retail is one company that has rethought its salary and recruitment policy (see box, left) to avoid companies trying to outbid each other for new employees.

Contractors' salary inflation is slowing up, as is economic growth. But the news is not all bad. As Leveson says: "Ultimately, highly inflated salaries do not do anyone any good. If we raise our salaries by a huge amount, so do our competitors; costs are increased, which is bad for business." Hays Montrose Ireland's Eardley agrees that runaway salary increases can only be a short-term delight: "It's actually good that salary growth has slowed in Ireland; big salaries put pressure on inflation." The challenge now is to enjoy the increases while they last.

Money isn’t everything: How one firm rewards its hard-working staff

Contractor Pearce Retail readily admits that its salaries are not the highest on offer in the market. The company has decided to take a more holistic approach to rewarding its staff by emphasising training, career development and performance-related pay. The group publishes the grade ranges of specific occupations and the salaries they command. Director of human resources Roger Leveson explains: “Employees can see what they will earn, if they make a particular grade. This means we are not just throwing money at people, but rewarding effort through a fair system. Over 50% of our employees were promoted last year so the benefits are definitely being felt.” Leveson says because the increases are closely linked to performance, the rises should be self-financing from the company’s point of view. The company has just completed a survey to measure how staff felt about their rewards including pay, holiday and benefits. The main complaint was about long working hours. Some staff were concerned their salaries did not reflect market value. Leveson admits the company has struggled to regulate working hours, but says it is trying to get to grips with the issue.

Regional round-up

Contractors in central London and the northern Home counties have enjoyed the largest salary increases, with assistant QSs bagging the largest rise in the region at 25%. Project managers, planners and site agents in the South-west have also seen salaries run ahead of inflation, with sub agents’ wages up 53% to £24,500. Hays Montrose’s Bristol office says vacancies have climbed to a record level in 2001 after an upturn in public construction work and a buoyant refurbishment sector. Contractors’ wage growth is above average in the West and East Midlands as the level of construction work in the region continues to rise. Mike Burton, manager of construction at Hays Montrose in Birmingham, says: “For the first time, we are beginning to match London rates – especially for site agents and project managers.” Elsewhere, the picture is less rosy. In the North-east, the salaries of engineers, foreman and project managers have grown less than 3%, and planners’ and senior QSs’ salaries in the North-west have stagnated. In Ireland, salaries have actually begun to fall as the country’s economic growth rate has slowed and wage inflation has eased – senior QSs salaries fell an average of 29%, though general foremen have seen rates rise 20%.