While the horticulture industry’s labour issues have received a lot of attention throughout the recent harvesting season, it isn’t the only sector in Hawke’s Bay experiencing labour shortages. The construction industry is also facing labour challenges, but for very different reasons.
While horticultural workers are thin on the ground, impacted by the unavailability of RSE and backpackers to boost the workforce, a lack of skilled workers across all building-related trades is making its impact felt throughout the construction industry. Combined with materials shortages, rising costs and production delays, it’s a perfect storm.
The ‘tradie’ crisis is hitting everyone hard. From large commercial construction firms working on multi-million dollar projects to homeowners simply wanting to renovate their bathroom, tradies are such a hot ticket that demand is far outstripping supply. Scarcity and materials delays are also adding to the problem. It’s a conversation that is dominating board rooms and coffee shops.
Gemco is one of Hawke’s Bay’s largest commercial construction and trades companies. At any given time, Gemco has around 20 large contract jobs on the go – the likes of the new Kaweka private hospital and the redevelopment of the Hawke’s Bay Opera House – and up to 100 smaller jobs including residential bathrooms, kitchens and other work including service works, repairs and maintenance. At June 2021, the company had over $100 million of work on its books.
Gemco managing director Darren Diack says the 18-year-old company is at capacity and is as “busy as we were pre-GFC”. However, the business is unable to grow further due to the lack of skilled tradespeople.
“We can fulfil our commitments now with our 130 staff, but can’t expand as we’re restrained by the lack of skilled workers. It’s difficult to recruit qualified tradespeople – plumbers, electricians, builders, painters, tilers – the whole lot.”
Hawke’s Bay’s labour ills are reflected in a national context, where local councils’ under-delivery on ‘shovel-ready projects’ (S-RPs) throughout the country is attracting heat. BayBuzz recently reported on which local S-RPs the government funded to the tune of $50 million have broken ground, and whether these are playing a part in our construction labour shortage.
Many of these government-funded projects have the shovel still firmly hanging in the cupboard, but a few are underway including water upgrades and road repairs. Debate is ongoing about whether the non-starter projects aren’t happening because of the unavailability of construction labour or other factors. It appears “planning” takes a lot longer in council offices than we all think. But it’s not just a tradie shortage councils are grappling with; it’s also a capability challenge in planning, consenting, building inspectors and suppliers to keep up with the demand.
Hastings District Council was awarded $13.5 million and one project has been completed – the $2 million Flaxmere housing project. According to the HDC, the three other projects are still in the planning phase.
Hawke’s Bay Regional Council was awarded $19.2 million of that funding for flood control, which has seen only $1.7 million spent so far. It is “undertaking preparatory work” to meet the construction date on three of its four approved projects and has increased the size of its project delivery team in order to do that.
“We are on track to deliver the programme,” says Chris Dolley, HBRC group manager – asset management. “Although we haven’t experienced a lack of resources for the delivery of this programme, we have found that the market has been challenging for some of our smaller business-as-usual projects, particularly in the vertical build sector. The only supply issue we’ve encountered so far is the supply of sheet pile for the Wairoa project, which has a four month shipping delay.”
“The councils’ projects are mainly infrastructure so we haven’t seen any spinoff from that as they’re not really taking skilled tradespeople,” says Diack.
So if infrastructure projects aren’t soaking up construction industry labour, why the shortage crisis and what can be done?
$2.7 billion blockage
To provide a way forward through this challenge, a Hawke’s Bay Regional
Skills Leadership Group (RSLG) has been formed and is looking at the construction pipeline.
There are 15 RSLGs in New Zealand, set up by the government to “identify and support ways of meeting future skills and workforce needs in the regions”. They will provide independent advice that employers and government agencies will act on, as part of a “joined up” approach to labour market planning to better meet the skills needs across the country.
A report prepared in March 2021 by the interim Hawke’s Bay RSLG focused on the construction sector and stated that Hawke’s Bay will be “unable to deliver $2.7 billion of known work over the next three years”.
The report went on to say that demand is far exceeding the current rate of supply of skilled or semi-skilled labour and the region will need twice the current number of qualified licenced building practitioners (LBPs) to cope with demand now, let alone in the future. Demand for projects in our region over the next three years is projected to be up 271% for civil, up 466% for commercial and up 158% for residential.
Co-chair of the interim RSLG Erin Simpson says the group has developed a good understanding of the local skills and labour challenges in light of the high level of demand in Hawke’s Bay’s building pipeline.
“We’ve identified that there is a big wave of demand in the construction sector and not enough trained staff to meet this demand. Shortages range across multiple areas and are influenced by factors such as the pressure on the housing market. We are working with our partners in the Matariki Pou 2 group and training providers to develop a suitable regional action plan that can support both the short term and into the future.
“By mid-2022 we will produce our first Regional Workforce Plan, which will have a long-term focus and project labour supply needs and ensure Hawke’s Bay has the right skills and workforce planning to seize opportunities,” says Simpson.
The RSLG has identified four major challenges the Hawke’s Bay construction sector is facing.
First, our current workforce is stressed and struggling to deliver projects on time. Project delays are increasing, and the risk that businesses will subsequently fail is a major concern to owners.
It’s a sentiment shared by Diack. “We’ll see more companies getting into financial trouble. Delays are causing major problems. For example if you price a house build at $1 million but building is delayed 18 months, then that will cause a blowout. You have to manage your business well to get through these times when cost escalation is out of control.”
Second, industry is unable to take on further inexperienced labour without compromising health and safety, and quality. Onsite supervision is required for all inexperienced labour, and supervisors can only be responsible for a maximum of two to three people at any one time. Currently this supervisor resource is fully utilised across the region.
Third, shortages of skilled staff such as project managers are causing delays to multiple projects. The on-going border closure is preventing overseas recruitment of skilled labour. Other regions in New Zealand are experiencing similar construction sector challenges, meaning sourcing out-of-region labour is not a viable option.
Fourth, shortage of basic materials continues to be a constraint for construction businesses due to shipping delays. The increase in demand for materials is putting pressure on the supply chains, increasing the time delays for projects.
‘Maybe in 2022’
Hawke’s Bay Homes owner and member of Certified Builders Association Mark Roil says his business is experiencing labour shortages, particularly a lack of foremen and project managers to manage the builders and apprentices.
“People need to be aware that there are material supply issues and a shortage of labour and therefore need to be realistic with their timeframes. Do all their due diligence and expect that their project may not happen for six to eight months. At the moment we need to order materials 12 weeks or so before delivery, so there’s a three-month delay right there. But we’re finding people don’t mind waiting for our service and we’re signing contracts for jobs in 2022.”
At the time of writing in June 2021, ‘We can do it in 2022’ seems to be a recurring answer to delivery timeframes.
A kitchen company I spoke to for this article is working on clearing its backlog, unable to visit new clients for another three months. They’ve employed three new people but even with boosted numbers, the earliest those clients will be enjoying their new kitchens will be sometime in 2022.
Tradies of all kinds are feeling the squeeze. Plumbers, sparkies, painters, chippies and tilers. Electrical contractor Campbell Simmonds has been working in the higher end of the market for clients including Andy Coltart for the past 12 years. He has four staff, down from six previously, and while he’d like to get back to that number, he is finding it impossible to find tradesmen.
“There’s simply too much work,” he says. “It’s competitive and quite a few tradies who do apprenticeships and qualify, leave to set up their own business. But on the plus side, having fewer staff has freed me up a bit. There’s plenty of work that’s for sure and I take on as much as possible and because of my capacity I can pick and choose.”
Materials delays are also affecting the electrical side of the industry. “Parts are taking one to two months to come from Australia,” says Simmonds.
Beside delays and labour shortages, rapidly increasing costs are hurting Hawke’s Bay’s construction industry.
“The cost of construction is the highest I’ve ever seen it and cost escalation is the biggest challenge our industry is facing,” says Diack. “Wages, salaries and materials shortages are driving that. Wages have increased 20% in the last three years and twice a week we’re getting letters from suppliers advising of cost increases; increases that have to be passed on. The construction industry here is at capacity and more companies is not the solution. It’s more labour. But with closed borders and the lack of international skilled workers, we can only build so much.”
Solving the shortage
So what can companies do to have more skilled people on their books? Training seems an obvious solution but there are also some companies using other, creative ways to tackle the issue.
Mark Roil now offers a four-day working week, with his staff taking every Friday off. Days start early however, at 5.30am. “Being in a factory environment we are able to turn all the lights on and even have a couple of diesel heaters for the cold mornings. The guys are really enjoying the extra day off and being able to spend time with the family or catch up on jobs at home. And with 90% of our work happening in a factory, being inside during wet and windy days is a huge attraction. We can even offer night shift work.”
Roil also hosts apprentices, with three currently in the business. Gemco currently has 25 apprentices across all construction-related trades. “Half will stay, half will go and of those who stay, half will become leaders. We are committed to training and even with those who leave after they’ve qualified, we are always at capacity,” says Darren.
Industry training organisations such as BCITO and Competenz, and training providers such as EIT are helping to plug the skills shortage gaps. The RSLG has a list of regional initiatives underway to help address the labour shortage. They include the new Te Aratika Academy collaboration with Tumu Timbers to train their students; the Tākitimu Tuanui; and the Hastings Place Based plan, a collaboration between the HDC, the Crown, Taiwhenua, Iwi and government agencies.
K3 Kahungunu Property Development, a wholly owned company of Ngāti Kahungunu, also has a firm commitment to upskilling.
K3 has three aspects to its business – growing its people through training and upskilling; building quality, affordable homes; and growing Māori business ownership. K3 chief executive Aayden Clarke says planning is always “front of mind” to ensure labour doesn’t become an issue.
“We build residential homes, of which some will be state, some affordable and some sold to market. We are trying to make sure our strategies equip us to meet our construction commitments, including playing our role in training people in all construction related trades and sub-trades. We currently have 18 apprentices in the K3 Māori trades training programme who are all placed in businesses we work with, and we partner with various ITOs. We have a high ratio of support staff to apprentices which means we can provide high quality education pathways and pastoral care to the learners with a tikanga Māori additive as they work towards their NZQA qualifications.
“K3 aspires to be a total wrap-around business. Building homes is important, but social outcomes are critical for us, for our communities and for whānau. This housing crisis presents us with a huge opportunity. In 15 to 20 years we don’t want to have just built homes, we want to have grown capability of Māori businesses and upskilled Māori people.”
The construction logjam is complex, with many aspects. What is clear is that Hawke’s Bay is staring down the barrel of a tradie crisis, and training is only part of the solution. Training programmes appear to be in place, but where are the bodies to fill them?
The effects are being felt widely – from homeowners, DIY weekend warriors and smaller one-man-band businesses to large commercial construction corporates and regional project leaders.
What is clear from all angles is that the Hawke’s Bay construction sector is restrained, at capacity and unable to grow. Unable to deliver a staggering $2.7 billion of known work over the next three years.
But if you do know a plumber who can replace my bathroom fittings, can you let me know please?
HB construction industry profile
• Accounts for $442m (6%) of regional GDP
• Steepest job growth year over year (Apr) in HB – up 7.1% (568 jobs added)
• Total jobs – 6,869
• House construction – 1,380 jobs
• Electricians – 716 jobs
• Road and bridge – 674 jobs
• Plumbing – 536 jobs
• Civil engineering/other heavy construction – 478 jobs
• 278,300 construction jobs nationwide