The government’s decision to extend the Self-Employment Income Support Scheme until the end of March 2021 and increase grants from 55% to 80% of earnings has been bad news for the construction industry, it is being argued.
Those speaking out against state aid for the self-employed are members of the British & Irish Trading Alliance (BITA), a networking group of predominantly Anglo-Irish businesses.
BITA’s membership includes Laing O’Rourke, Danny Sullivan Group, J Coffey Group, Ballymore, McNamara Construction, O’Donovan Waste Disposal and many others from across the construction supply chain.
Members say that many construction workers are choosing to sit at home and take 80% of usual earnings rather than go to work for 100%.
BITA president Paul Whitnell said: “The feeling between our members is that what is being proposed with the extension to this scheme for self-employed construction workers will negatively impact the recovery of this important industry.
“Initially the industry welcomed the announcement of the new income support scheme for the self-employed as a much-needed stop-gap measure to tackle sites being paused while they were made Covid safe. An unexpected side-effect of the scheme has seen labour shortages and a tightening of profit margins.
“The construction industry pivoted very quickly when it came to re-opening in a safe manner, however at this point the employees were eligible to receive the first grants. Understandably, and not entirely unpredictably, many workers were tempted by a scheme that delivered 80% of their regular wages, whilst allowing them to stay at home without travelling or working.
“As a further knock-on effect, many of the workers in construction are EU nationals, and a large proportion of these chose to return to their home nations to be with their families and cut the cost of living, once their grants had been secured.
“The impact of this has been two-fold. Firstly, there has been a shortage of labour which has impacted the ability of companies to deliver projects on-time. Secondly and as a direct result of the first, cost of labour has gone up by as much as 25%.”
J Coffey Construction, Eleci Serve, O Donovan Waste, Danny Sullivan Group and Oliver Connell & Sons have all reported similar findings from their own businesses, BITA said.
James Coffey, group chairman of J Coffey Construction, said: “We witnessed a significant labour issue during the first government lockdown earlier in the year, which is now reoccurring during lockdown version two and will have even bigger implications.
“The government’s income support scheme for the self-employed was welcomed at the time to assist the large number of self-employed workers effected by the pandemic. However, within our sector it ultimately resulted in driving a certain behaviour which has since had a significant negative impact on our business.
“At the beginning of the first lockdown, the construction industry reacted extremely quickly, as did we, which allowed our required labour levels to return to a position similar to pre lockdown. However, by this stage self-employed workers were eligible to receive the first grants.
“As you can imagine the prospect of receiving up to 80% of income whilst remaining safely at home and without the requirement of traveling and working, proved extremely attractive to a lot of workers. We noticed quite rapidly this impacted our ability to deliver projects and quickly drove up our labour rates by over 25%.”
Mr Coffey continued: “The government have made it extremely clear that during this second lock down construction is to remain open. However, they also announced the extension of the Support Scheme grant until March 2021. Self-employed workers within the construction industry remain eligible for this extended scheme. The extension is therefore counterproductive and will affect our ability to deliver projects. Labour will choose to claim the grant and return home, to enjoy an extended holiday from now across the Christmas period, and potentially well into the new year to when the scheme ends.
“We are already seeing the effects of this with some workers already leaving to return home, whilst those that remain are demanding significant rate increases. This is going to have a major effect on existing contracts, both on program and cost.”
Got a story? Email news@theconstructionindex.co.uk
