Many construction companies are concerned about the financial impact the National Living Wage ( NLW ) could have on their businesses . Following the introduction of the NLW in April 2016 , all staff members aged 25 and over will now be paid at a rate of £ 7.20 per hour , up from £ 6.70 - with the aim to reach £ 9 per hour by 2020 . Wayne Lysaght-Mason , managing director at IronmongeryDirect , explores some options to help firms keep financial consequences to a minimum . Currently , trading conditions within the construction sector are quite challenging , with the cost of workers and building materials putting pressure on profitability for many firms . The rising demand for new housing has resulted in soaring prices for building materials , with the Office of National Statistics reporting that brick prices have risen by almost 25 %, cement by almost 17 % and plastic doors and windows by 10 % during the past five years .

And given that the construction industry is facing its biggest skills shortage since 1998 , builders ’ wages have increased considerably as firms battle it out to attract the best workers from a limited talent pool . According to the Royal Institute of Chartered Surveyors ( RICS ), the skills shortage pushed industry wages up by more than 6 % in 2015 .

‘ 45 % had so much work on they had to turn jobs away ’

In light of the new NLW legislation , many firms are likely to feel further pressures to their profitability , particularly as the construction sector is a big employer of workers over the age of 25 . So with this in mind , what steps can firms take to keep the effects of the changes to a minimum and ensure that workers ’ wages are sustainable ?

EFFECTIVE MARKETING WILL INCREASE PROFITS Growth within the sector is quickly rising , particularly as the government tries to combat the current housing crisis in the UK , with its promise to build 200,000 new homes each year by 2020 . As a result , the building sector is now picking up and in fact , IronmongeryDirect ’ s Annual Industry Review found that work is coming in thick and fast . Of the 600 UK tradespeople surveyed , over half described themselves as very busy throughout 2015 and 45 % had so much work on they had to turn jobs away . Over the next four years , there is a huge potential for growth and profits are expected to soar . This means that although wages for workers over the age of 25 have increased , firms should be seeing a rise in the amount of work coming in which will cover these augmented costs . By investing in effective marketing strategies , construction companies will have a greater advantage when it comes to winning big tenders .

Taking steps to increase brand awareness , such as building a high quality website , promoting services via social media and investing in strategic advertising , will help to bring in new business . In turn , this will help to minimise any effects caused by the NLW .

ATTRACTING YOUNG TALENT BACK INTO THE SECTOR During the 2008 recession , over 300,000 skilled employees were forced to leave the construction profession as work slowed and trade firms struggled to keep their heads above water . But with the recession now behind us and activity within the sector on the rise , the industry is in desperate need of attracting new workers to keep up with demand and restore workforces back to their former size . By 2020 , the Construction Industry Training Board ( CITB ) predicts the sector will need to hire 224,000 new members of staff to meet the government ’ s housebuilding targets . With over 622,000 16-24 year olds currently looking for employment ,

attracting new talent to the industry is just one option . At present there is a lack of young people entering the sector , but by creating more training and apprenticeship opportunities , this new generation of workers will have the chance to get their foot on the career ladder . And given that the NLW policy only applies to those workers above the age of 25 , taking on young apprentices can help lessen the impact of the recent wage rise . Overall , the construction sector appears to occupy a positive economic position , which is continually gaining strength . With the number of building projects on the up , firms should see their profits heading in this direction too . For this reason , it ’ s unlikely that many companies will be hit hard by the new wage legislation . Additionally , as the NLW has now improved wage conditions for the nation ’ s workers , this could help attract people back into the sector and help overcome the current skills shortage .

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