The latest quarterly report from the Royal Institution of Chartered Surveyors (RICS) indicates that construction workloads are on the rise again, helped by big ticket infrastructure projects.
Credit conditions remain a challenge, but there are signs of some easing, RICS says
The headline reading for workload activity in the RICS UK Construction Monitor Q1 2023 showed a positive net balance of +3% compared with -1% in the previous quarter (Q4 2022). Private commercial and private industrial workloads improved slightly, (+2% and +3% net balances respectively), as did public housing workloads (to +7% net balance). Private housing remains in negative territory, with the net balance now standing at -9%.
Infrastructure has the most positive workload reading, sitting at +23% net balance across the UK, and 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.
Anecdotal remarks from respondents continue to focus on concerns about labour shortages. Significantly, a key problem area in terms of recruitment remains quantity surveyors. Hiring trades also continues to prove difficult, RICS found.
The proportion of respondents reporting financial constraints as a challenge rose for the fifth consecutive quarter, reaching 64%. With further hikes in base rates possible in the face of continuing double-digit inflation, this challenge is unlikely to go away soon, RICS warns. 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.
RICS chief economist Simon Rubinsohn 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.”
RICS was among industry organisations that lobbied the government to relax immigration rules for foreign construction workers. The government listed and added numerous construction trades to the official shortage occupation list, creating a legal route to entry for immigrant construction workers. Now, however – having got what it asked for – RICS says it won’t make much difference anyway.
Senior public affairs officer Mahvesh Ibrar said: “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.”
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