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Sat 4 Nov 2006 08:00 PM

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Construction industry faces talent crisis

Construction firms in the Gulf are finding it increasingly challenging to attract the quantity and quality of engineering and managerial talent needed to implement their projects, according to a report released last week by GulfTalent.com, a Dubai-based online recruitment firm covering the Middle East.

“The massive rise in regional activity as well as the growth in international markets, particularly India and China’s booming construction sector, are largely to blame for the skills shortages,” explains the report.

Furthermore, the construction sector has been maturing fast, with the standard of projects rising significantly over the last five years. As a result, many players find themselves having to upgrade much of their workforce in order to remain competitive.

With such growing competition for a limited talent pool, average salaries for professionals in construction rose 12.8% over the 12 months to August 2006, up from 8.9% for the same period last year. Indeed, construction witnessed the highest salary increase among all sectors in the Gulf; in comparison, average increases across all sectors were 7.9% and 7.9% for the two years, respectively. The increases were greater among regional firms, while international firms present in the region offered below-average rises.

The rapid growth in India has had a particularly significant effect on the Gulf as the country has traditionally been the main source of engineers and mid-level managers. Property development has surged in India since 2002 in order to meet the annual doubling of demand for office space as foreign firms continue to invest in the country’s growing number of call centres and IT sector. With increased employment opportunities and salaries rising faster in India owing to the robust economic growth taking place there, Gulf-based employers are having to re-negotiate pay packages to attract and retain Indian professionals.

As well as improving pay packages, construction firms are looking for qualified expertise from hitherto unexplored sources, with a growing number of employers now recruiting from Asia as well as the Arab world, notably Egypt. Other firms are resorting to hiring younger candidates including fresh graduates. The report observes: “Only a few years ago they would have been passed off in favour of more experienced staff.”

Lifestyle issues are also coming to the fore, with the long practiced six-day working week prevalent in the sector coming under scrutiny. Given the intensity of competition and the pressure to deliver projects on time, firms are reluctant to switch to a five-day week and yet the report noted: “Several contractors reported losing engineers, managers and support staff to consultancies, to other sectors or to other parts of the world where they could enjoy a two-day weekend.”

In the event of such legislation being introduced, project delivery times could become longer and costs increased even further across the construction sector.

Partly due to the working week, but also other lifestyle factors, there appears to be a steady flow of talent up the value chain – from contractors to consultancies, and from consultancies to developers. This is further exacerbating the talent shortage. In addition, the sector’s growth has attracted large numbers of players – particularly in the contracting segment of the market where barriers to entry are lowest.

Consequently, new contractors are being established every month, sometimes by departing executives and senior managers of incumbent players.

According to industry reports, projects planned or already under construction in the region are estimated to be in excess of US$1 trillion in value, making the Gulf the biggest projects market globally on a per capita basis. More and more international firms have started operations in the region, while many regional firms have expanded their activities beyond their home countries; many UAE and Lebanese companies now bid for projects in Qatar. By far the biggest concentration of construction activity has been in the UAE and Qatar.

Despite increased salaries, talent being sourced from new markets and the proposed six-day working week, staff shortages prevail, forcing many contractors to turn down projects. GulfTalent.com predict the shortages will continue for the foreseeable future.

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