Fit out firms battle rising costs and labour crunch

By April Lara

August 13, 2024

Photo of office fit out

The fit out industry, a sub-sector of construction is facing challenges. Soaring labour costs, rising prices of raw materials, and a persistent shortage of skilled workers are putting significant pressure on these businesses. These threaten project timelines and profit margins.

A recent Construction Outlook Survey revealed an increase in turnover and employment in the construction industry in Ireland during the second quarter of this year and is expected to continue. The upward trajectory will impact subsectors, including the fit out industry, which is grappling with a double-edged sword: rising material prices and labour costs.

The survey highlights the severity of these issues with 67% of companies reporting a year-on-year increase in labour expenses and 64% experiencing a similar uptick in material costs.

Hubert Fitzpatrick, Director General of the Construction Industry Federation, emphasized the strain caused by hyperinflation in building and construction materials. He noted, “Hyperinflation in many building and construction materials in recent years, as well as fuel, has put a strain on the cost of delivering some of the infrastructure projects in the National Development Plan, as capital budgets are pre-determined. The Construction Outlook Survey results have been tracking this for some time.”

While the Irish fit-out sector grapples with these challenges, the situation is mirrored across the Irish Sea. The UK construction industry, like its Irish counterpart, is experiencing growth. However, the fit-out sector in the UK is similarly under pressure from rising costs and a severe labour shortage.

For those in the fit out sector, these cost pressures mean a lot of challenges. First, there’s the issue of project budgeting with material and labour prices fluctuating rapidly. Making accurate project estimate costs is becoming daunting, which can lead to financial risks and unforeseen expenses that can impact profit margins.

The labour shortage is particularly acute in fit out because it relies on a specialised skill set. The UK government has recognised the construction industry’s labour shortage and has responded by introducing the UK Shortage Occupations List. This initiative aims to alleviate workforce pressures by expediting visa applications for specific roles. Several construction trades are currently listed as high-demand occupations, including welders, carpenters, and plasterers.

The scarcity of talent drives up wages and leads to project delays as companies scramble to fill vacancies.

The situation is further compounded by the increasing complexity of fit out projects. Clients are demanding more sophisticated and customised spaces, which require specialised skills and additional resources. According to RFM Group, a leading turnkey solutions provider across the UK's building lifecycle, companies have increasingly sought to create environments that not only reflect their brand identity and corporate culture but also cater to the specific needs of their employees.

While the construction sector as a whole is experiencing growth, the fit-out industry is facing unique hurdles. Addressing these challenges will require government support, industry collaboration, and innovative solutions from individual businesses.

Ultimately, the ability of fit-out companies to navigate these challenging times will determine the industry's future. Those who can successfully adapt to the changing landscape and find ways to mitigate the impact of rising costs and labour shortages will be best positioned for long-term success.

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