Workloads in UK
construction and infrastructure continued to rise in Q3 2017, according to the
latest RICS UK Construction and Infrastructure Market Survey, with 22% more
respondents seeing a rise in workloads of the quarter, with a steady pace of
growth.
However, while
activity remains steady, comments left by respondents continue to highlight
Brexit-related uncertainties as weighing on investment decisions and the lack
of sufficiently skilled workers also remains an obstacle for many businesses.
Having eased
throughout 2016, the intensification of labour shortages is biting once more in
the quarter with 62% of contributors citing this as an impediment to growth.
This contrasts with an average of 40% when data collection first began in 2012.
Within this, respondents to our survey are still seeing a lack of quantity
surveyors (64%) as well as other professionals (52%). 44% are also seeing a
shortage of workers within specific trades.
"While activity
in the sector has moderated, growth and growth expectations remain in positive
territory," said Jeffrey Matsu, RICS' Senior Economist.
"Uncertainties
due to Brexit continue to weigh on companies’ investment and hiring decisions,
and banks appear to be adopting a more cautious stance to providing finance.
Meanwhile, challenges related to an inadequate supply of skilled labour are as
pronounced as ever."
Despite government
efforts to bolster the workforce and the prominence of apprentices, through an
apprenticeship levy introduced earlier this spring, only 42% of respondents
feel that government-funded programmes are moderately effective, with one-third
unsure. The quality of the talent pipeline is insufficient as well – less
than half (45%) of employers who currently hire apprentices view them as a
long-term solution to their hiring needs.
Breaking the rise in
workloads and activity down to a sector level, growth is strongest in the
private housing sector, while remaining broadly stable elsewhere. Meanwhile,
the public non-housing sector continues to underperform all others. In
infrastructure, 21% more contributors reported a rise rather than a fall in
workloads. Nationally, respondents expect the rail and energy sub-sectors to
post the most significant increases in construction output over the coming 12
months.
Despite
uncertainties, a net balance of 45% of respondents expect headline activity to
continue to rise rather than fall over the year ahead. Nevertheless, this is
down from the four quarters immediately preceding the EU referendum, which
averaged 62%, reflecting a somewhat less optimistic outlook. Meanwhile, 30%
more contributors expect employment to rise rather than fall (broadly unchanged
from Q2).
While a shortage of
workers is hampering activity and profit margins, financial constraints are
still reported to pose the most significant challenge, although the share of
contributors expressing this view has come down to 69% (from 79% in Q2). Access
to bank finance and credit remains by far the most frequently cited issue,
followed by cash flow and liquidity. This likely reflects a more cautious
stance by banks given cyclical market conditions and Brexit considerations.
Higher input costs
and a shortage of labour continue to restrict growth in profit margins, with a
net balance of only +12% of respondents expecting a rise in margins over the
coming year. This is likely to have impacted tender pricing as well, with 62% and
56% more respondents in the building and civil engineering areas, respectively,
envisaging greater price pressures.
