Running to stand still

Christmas 2002 may have to be a less lavish affair than last year; in fact, it looks like it is time to tighten your purse-strings. After more than three years of consistently high salary increases, growth in contractors' pay has slowed dramatically this year. Across the board, junior professionals have had rises that barely match the retail price inflation (currently about 1.8%), whereas more senior professionals have seen rises of about 4-5% – but that is a significant drop from the surges of up to 25% that were reported last year.

The 2002 Hays Montrose/Building contractors' salary guide shows that the remuneration bubble has begun to deflate. Engineers in particular are finding that their bargaining power is waning; in London, engineers with about two years' experience are being offered, on average, £26,000 for new jobs – that's 10% less than they commanded last year. And although most regions have seen some modest salary growth, in the South-west, Wales and Ireland, professionals of all types are finding it tough to get the pay rises they enjoyed in 2001.

As ever, it is senior QSs who are bagging the largest salary hikes – they are earning on average 7.4% more than last year. They even bucked the general trend by managing a growth rate that outstripped 2001. Despite the thickening wallets of the QSs, recruitment agencies say that far from being concerned about poor salary growth, they are reassured that wages are stabilising.

"The increases we saw last year were unsustainable," says Iain Dennis, Hays Montrose's regional director for the South-west. "Companies cannot afford 7-8% pay rises every year, so I'm glad to see that things are calming down. But we're not expecting the growth rate to slow up any more; we're still very busy here in the South-west." For Dennis, the slowdown in salary growth is hardly surprising in a low-inflation economy, and does not necessarily mean that the construction sector has shrunk in the region. "The salary bubble hasn't burst, it's just that there is less pressure on firms to keep raising their pay now that the general economy is moving more slowly," he says.

Adrian Basu, regional director for Hays Montrose in the East Midlands, agrees that the heat has gone out of the recruitment market. "From 1999 to 2001, there was a lot of movement in salaries in the Midlands – this year the amount of work has slightly levelled off, allowing the market to cool," he says. But Basu stresses that there are still a lot of companies struggling to find the right people. "Those who are highly skilled and experienced are always in demand – I don't think there will be any changes there in the foreseeable future." However, for some interior contractors, even a high level of experience has not been enough to protect them from the downturn in the fit-out sector in the South-east.

"Since 11 September, the commercial fit-out sector has slowed a lot. Banks and other financial institutions, which constituted a large sector of this market, just aren't commissioning new projects – so some contractors have even started to make redundancies," says Richard Madgwick, recruitment consultant at Hays Montrose's central London office. He says that whereas QSs are seen as having transferable skills, those on the contracting side are finding it harder to shift into other markets.

Other professionals are faring better. Along with QSs, the wages of estimators, site agents and buyers have swelled by a healthy margin, with juniors' salaries jumping 4.2% on average. Nick Redpath, head of construction recruitment in the South-east for consultant Judd Harris, says buyers are commanding up to 40% pay increases. "A buyer I recently dealt with was thinking of leaving his company after getting a better offer from a rival. His company was so keen to hang on to him that they gave him a £14,000 pay rise on his £35,000 salary," he says. This largesse reflects the shortage of skilled surveyors in the commercial market in the South-east, a shortage that continues to trouble employers across the country.

Redpath says the skills shortage is evident in the lack of operational personnel and middle managers in the housebuilding sector. "The amount of brownfield development in housing means that sites are getting more complicated and there is a big need for engineers and other hands-on people who have a background in contracting. And there's demand for middle managers to oversee it all – but there aren't enough of them," he says.

In contrast, there are plenty of senior managers who are on the consultant's books having lost their jobs in one of the industry's recent consolidations. Redpath says these individuals have to tone down their salary expectations to find new work.

Scotland is grappling with a dire shortage of QSs and a growing lack of site agents, who have seen their salaries upped as much as 41%. Hays Montrose Scotland says senior site agents can earn up to £50,000 because employers are looking to expand the role. "Contractors are looking for site agents to take on a lot more responsibilities – including some of those normally held by contracts managers. It's a way of tackling the skills shortages, and we're seeing this kind of multitasking more and more often," says Carol Fyfe, senior manager at Hays Montrose in Scotland.

Another reason for the dramatic leap in site agents' salaries could be the decreasing number of tradespeople progressing to do the job. As Fyfe says, the shortage of tradespeople such as plumbers and carpenters means that these individuals can earn more by plying their trade than by working as professional agents. "Self-employed tradesmen are earning up to £500 a week in Scotland – so why would they want the stress of taking a managerial role on site? They are staying put rather than going up the career ladder."

Despite these pressures on salary growth, most consultants agree that 1999's halcyon days of 20% wage growth are long gone. But most also agree that employers are increasingly switching on to the concept of non-salary benefits. As Hay's Montrose's Dennis puts it: "Employers are getting increasingly sophisticated; more realise that people want decent pensions and time at home with their families. The days of working until you burn out are also over – and that has to be a good thing."