Labour shortage clouds construction boom despite strong PMI reading

Construction sector recorded an index value of 75.0, its second highest reading since highest of 75.7 recorded in July 2020

As the construction sector gains momentum, the firms are again met with another, yet a predictable issue, in finding the needed skilled employees for the occupational categories.

Sri Lanka’s industries are mostly hamstrung by the lack of skilled labour and construction is at the forefront.

The cost-of-living crisis in 2022 and its aftermath forced many skilled people to leave the country, seeking employment, while the cost of labour rose sharply, sending the doing business costs dramatically higher, adding a fresh impediment for the small and medium sized businesses in the country.

According to the latest Purchasing Managers’ Index data for January 2026, the construction sector recorded an index value of 75.0, its second highest reading since the highest of 75.7 recorded in July 2020, when the economy reopened from the first round of pandemic-related lockdowns.

This reflects that the sector is seeing increased activity, as seen from the total activity index, which recorded an index value of 75.0 in January.

In December 2025, despite certain disruptions caused by the floods earlier in the month, the index recorded an index value of 67.1, signalling continued expansion in the construction sector.

“Most firms reported increased project activity during the month, driven by the commencement of new projects in the new year and the easing of weather-related disruptions experienced in December,” the Central Bank said releasing the index for January.

However, at a time when the sector is making meaningful gains, due to both public spending and private spending projects getting off the ground, the lack of skilled employment in the sector could slow things down.

“… many firms emphasised the persistent difficulties faced in recruiting employees to various skilled occupational categories,” the statement added.

There is a lot of hope for the government to add more impetus to the sector, both due to the rebuilding efforts needed after the flood caused destruction as well as the highest ever allocation on public investments made by the government, which is Rs.1.4 trillion for 2026, from Budget 2026.