Construction Workloads a Mixed Picture in Q2

CONSTRUCTION WORKLOADS are a mixed picture in the second quarter of the year as credit constraints and labour shortages create near-term challenges for industry.

This is according to the Royal Institution of Chartered Surveyors (RICS) UK Construction Monitor Q2 2023.

Construction Workloads

Workload activity remained a flat figure in the second quarter, falling slightly to -1% from +3% in Q1 2023. However, trends differed at a sector level. Infrastructure remained the strongest growth area, showing a net balance of +17%. Other public works also showed a positive trend.

In contrast, residential workloads are expected to be flat over the next twelve months, and private housing fell (-12%), returning to where it was at the end of 2022. The only lower reading than this was in the aftermath of the Global Financial Crisis.

Credit Conditions

Financial constraints were singled out as the number one factor limiting construction output, with 64% of survey respondents considering it a challenge. Many voiced their concerns about the Bank of England’s money-tightening policies negatively impacting the industry. This was reflected in Q2’s worsened credit conditions which showed a net balance reading of -42%.

The survey also showed an increasing number of respondents anticipate credit conditions to continue to worsen over the course of the next three and twelve-month periods.

Labour Shortages

Skills and labour shortages also further continue to hamper activity. More than 50% of respondents reported difficulties recruiting quantity surveyors, while bricklayers and carpenters are also in high demand. Despite no sign of this ongoing problem abating soon, the survey shows many in the industry plan to tackle it through investment, with +25% of respondents looking to increase spending on training programmes.

RICS Head of Professional Practice – Construction, Amit Patel, said: “We welcome the recent government announcement on committing to delivering one million new homes this term – a sign of confidence for the residential construction sector, but recognise it is less than the 300,000 annual target they set.

“Realistically, to deliver on housing targets, investment is needed to build up a diverse future pipeline of construction skills, in particular to embrace digital and green technologies. In the short term, however, there should be more flexibility for international recruitment. We advised the Migrant Advisory Committee in their recent review of the Shortage Occupation List that the built environment professions, including quantity surveying, should be on the list which could be addressed through the recruitment of overseas workers.”

Outlook

Despite these elements holding back activity, the report shows industry remains moderately positive about the future. Infrastructure still leads the way in terms of workload expectations, with +27% of respondents predicting an expansion. Commercial workload expectations also remain relatively upbeat (+12%). Only in private housing does the picture look somewhat downbeat, with a broadly flat net balance.

Simon Rubinsohn, RICS Chief Economist

RICS Chief Economist, Simon Rubinsohn, said: “Feedback to the Q2 survey shows the rising trend in base rates is leading to increased financial pressures in the construction industry. This is not anticipated to lessen any time soon and is also reflected in the cautious assessment regarding the outlook for profitability.

“However, there are some signs of an easing in the extent of skill shortages which is accompanying the flatter trend in activity. Infrastructure numbers remain solid, but the survey provides further evidence of the challenges in delivering residential developments at the current time.”

>> Read RICS UK Construction Monitor Q1 2023 here