The Royal Institution of Chartered Surveyors (RICS) UK Construction & Infrastructure Monitor for Q3 2022 indicates that construction activity is expected to start slowing down in the year ahead.
While workloads are actually still rising, this growth is starting to slow and is expected to turn into reverse for the next 12 months.
Survey respondents expressed greater doubts about economic headwinds this time than they did three months ago. There is now greater concern regarding how macro factors may impact the industry, specifically with respect to credit constraints.
The headline reading of construction workload activity for the whole of the industry has lost momentum over the past quarter, with a net balance of +17% of respondents reporting an increase, compared to +30% in Q2. The infrastructure sector continues to hold up better than other areas, with a net balance of +32% this quarter. However, momentum has slowed across all categories. Private industrial, for example, dropped from a net balance of +28% in the previous quarter to +12% in this quarter and private commercial dropped from +25% to +10%. For private residential, the latest workloads net balance slipped to +17%, compared to a reading of +29% beforehand.
Business enquiries have also eased compared to Q2. The positive net balance has fallen from +36% in Q2 to +15% for Q3.
The score given to the expectations of survey contributors fell to a net balance of -23% this quarter from -14% in Q2, the worst figure for two years.
Among the difficulties facing the industry, respondents cited shortages in materials and labour, alongside increasing financial constraints. 77% of contributors cite material and labour shortages while 74% drew attention to a scarcity of labour as factors hindering activity. Also, 56% of respondents cited a lack of quantity surveyors as a factor holding back construction activity.
RICS chief economist Simon Rubinsohn said: “The deteriorating macro environment is clearly taking a toll on the construction industry with access to credit now being cited as a key challenge for businesses alongside the more familiar issues around building materials and labour. Indeed, the RICS metric capturing the extent of skill shortages in the sector has barely budged in recent quarters with quantity surveyors and a range of skilled trades in particular short supply.
“Meanwhile, the impact of the shift in the economic outlook is most visible in the residential and commercial sectors where workloads are now viewed as likely to flatline over the coming year. Ongoing commitments to a number of big projects is, however, continuing to support activity in the infrastructure area. The thoughts of the chancellor on November 17th may provide some clues as to whether this trend is likely to be sustained over the longer term.”
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