Construction Workloads Rise in Q1 but Labour Shortages Create ‘Serious Issues’

WORKLOADS IN THE UK’S CONSTRUCTION SECTOR gained steam in the first three months of the year, with the metric returning to positive territory.

This is according to the Royal Institution of Chartered Surveyors’ (RICS) UK Construction Monitor Q1 2023.

Workload Activity 

The report shows that workload activity edged upwards in Q1, recording a net balance of +3% compared with -1% in Q4 2022. Private commercial and private industrial workloads also improved slightly, (+2% and +3% net balances respectively), as did public housing workloads (to +7% net balance). However, private housing remains in negative territory, with the net balance now standing at -9% as against -13%.

Infrastructure has the most positive workload reading, sitting at +23% net balance across the UK. The energy component continues to demonstrate the greatest strength, as it has done since 2021, with a net balance reading of +46% this quarter. This represents a slight increase on the +45% posted in the last quarter.

Labour Shortages

Anecdotal remarks from respondents continue to focus on concerns about labour shortages. RICS says the key problem area in terms of recruitment remains quantity surveyors. Alongside this, hiring trades is also continuing to prove difficult.

Feedback around expectations on employment remain solid. A net balance of +35% respondents reported having recruited employees over the past three months and looking ahead, +27% net balance expect to continue to do so. The proportion of contributors envisaging increasing investment in workforce training and development has also risen, despite the ongoing squeeze on profitability facing many businesses in the sector, which may be attributed to lack of skills elsewhere.

Mahvesh Ibrar, RICS Senior Public Affairs Officer, said: “Whilst the construction sector continues to recover from recent market and economic pressures, the skills shortages within the sector are a continued cause for concern as construction demand outstrips the industry’s capacity. Not only is this impacting our housebuilding ability, but if we are to tackle the climate emergency and meet the retrofit challenge, this issue needs to be addressed as a matter of urgency.

“RICS previously called on the government to review its Skilled Worker Visa scheme to help address the labour shortage facing the sector. Whilst we welcome the Chancellor’s announcement in the spring budget on the expansion of the Shortage Occupation List, the expansion benefits could be minimal as the sector has traditionally avoided using these types of routes for recruitment.

“RICS continues to call on the government to invest in home-grown talent and expand built environment education in schools to develop the next generation of professionals.”

Credit Conditions

The proportion of respondents reporting financial constraints as a challenge rose for the fifth consecutive quarter, reaching 64%, and with further hikes in base rates possible in the face of continuing double-digit inflation, this challenge is unlikely to go away soon, says RICS.

Materials shortages also continue to hold back building projects, although the proportion reporting shortages as a key constraint (+56%) reduced for the fourth successive quarter.

Simon Rubinsohn, RICS Chief Economist, said: “The negative mood around development has eased somewhat in recent months with the workload trend stabilising away from infrastructure where the trend remains more positive. A key challenge for the sector continues to revolve around labour shortages in general and skills in particular. Unless addressed, this could prove to be a significant drag on the ambitions of the construction industry.

“Unsurprisingly, credit conditions remain restrictive for now but there is a sense that they could ease as the year wears on. Whether this improvement materialises remains to be seen in the face of the ongoing banking stress in the US and how this plays out around the globe.”

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