The RICS report on the UK construction industry has shown a fall in overall workload in the most recent quarter
The overall workload in UK construction decreased from +3% in the previous quarter to -1%, indicating a slowing of business.
According to the RICS report, credit availability is getting worse and financial limitations are restricting construction output.
Despite these slower trends, the Royal Institution of Chartered Surveyors reported some growth in certain areas of the industry. Infrastructure continues to show strong growth, with a reading of +17% this quarter.
The private housing sector has suffered the most
However, the private housing sector has fallen to -12%, which is similar to its state at the end of 2022. This is the lowest reading for the private housing sector since the Global Financial Crisis.
Many participants expressed concern over the broader economic difficulties in the UK and Bank of England’s policies.
Credit conditions have worsened over the last quarter, with a reading of -42%. financial limitations are seen as the main factor obstructing construction activity, with 64% participating citing it as a concern.
In addition to financial issues, a shortage of skills has also affected growth in the construction industry. Over 50% of respondents mention difficulties in recruiting quantity surveyors, bricklayers, and carpenters.
The UK government is being urged to take more action to address the construction labour shortage
Despite the prime minister easing visa regulations for foreign tradespeople, the government is still being urged to take more action to address the labour shortage in the construction sector.
Around 25% of respondents are considering increased spending on training programs as a solution.
Many people in the construction industry are still somewhat optimistic about the future. Respondents are positive about infrastructure, with a +27% expected growth. Expectations for commercial projects also remain fairly positive at +12%.
RICS report predicts more financial pressure to come
“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,” said the RICS chief economist Simon Rubinsohn.
“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,” he explained.
