The skills shortage in the construction industry is forcing companies to turn away work, delegates attending a conference organised by the Recruitment and Employment Confederation's construction sector group in London heard.

Peter Stephens, from the Department of Business, Enterprise and Regulatory Reform, told the conference: "We have seen evidence that construction firms are turning away contracts as they don't want a bad reputation for not finishing projects in time because they don't have the skilled labour."

Contract Scotland told Recruiter that it, too, has seen the trend. Office manager Emma Watts said: "In Edinburgh there are some companies which have won contracts and are now worried they may lose money on them.

"There is so much construction work at the moment companies are fighting against each other for the skilled workers, which is leading to excessive salaries."

Construction recruiters attending the conference called on the major construction companies to do more to help them tackle the skills shortage, to help them protect vulnerable workers and check the eligibility of migrant workers.

However, Stephens said that he did not think that extending the Gangmasters Licencing Authority's powers to cover the construction sector would help the situation. "It is difficult to make money in agriculture so if the gangmasters could have moved sectors they would have, regardless of the GLA," he said.

The event was organised to mark the launch of the REC construction sector group's code of practice. The code covers areas such as training, safety, working relationships, ethical international recruitment and respect for diversity.

Group chairman Trevor Rees said: "Over the past year, I have met with many private and public sector clients of construction recruiters and this code is aimed at addressing any concerns they hold about our sector. The code will set a new standard of professionalism for construction recruitment."

The code has been endorsed by the Construction Confederation.