The headline workload reading from the RICS UK Construction Monitor Q2 2023 is -1%, down from +3% three months ago.
RICS members report the deteriorating credit environment and associated financial constraints as the number one factor limiting construction output.
Despite the headline flat picture, there are divergent trends at sector level. Infrastructure shows a +17% reading this quarter while private housing was at -12% – its lowest since the 2007/08 global financial crisis.
Looking ahead, there is no expectation of private house-building picking up. However, a positive net balance of 27% of RICS survey respondents infrastructure activity to expand in the next year and 12% expect commercial workloads to grow.
Many survey respondents aired concerns about the ongoing broader economic challenges and money-tightening policies of the Bank of England negatively impacting the industry. Credit conditions appeared to worsen over the past quarter with a reading of -42%.
Skills and labour shortages also continue to hamper activity. More than 50% of respondents note difficulties recruiting quantity surveyors, while bricklayers and carpenters are also in high demand despite softening workloads.
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.”
RICS head of professional practice for construction, Amit Patel, added: “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 (MAC) in their recent review of the shortage occupation list (SOL) that the built environment professions including quantity surveying should be on the list of ‘skilled’ occupations that have been assessed to be in shortage in the UK which could be addressed through the recruitment of overseas workers.”
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