There is optimism
for construction workloads in the UK, despite uncertainties around Brexit
weighing on investment decisions, and various market constraints, according to
the results of the Q4 2017 RICS Construction and Infrastructure Market Survey.
In Q4 2017, 21% more
chartered surveyors reported their workloads to have risen despite financial
constraints, labour shortages and planning delays remaining key impediments to
growth with 80%, 60% and 60% of surveyors reporting difficulties with each, respectively.
Comments from some
respondents suggest that stricter conditions being placed on firms by financial
institutions are limiting growth, which most likely reflects increased caution
given cyclical market conditions and Brexit considerations.
The lack of
sufficiently skilled workers also remains an obstacle for many businesses,
particularly with regard to professional services such as quantity surveying -
only in 2007 had the share of contributors highlighting this as a concern been
higher.
Also measured in the
Q4 2017 survey was an assessment of how contributors feel about the wide range
of policies included in the Autumn Budget and Housing White Paper to lift
housing delivery to 300,000 units per year. Nationally, only 12% of respondents
expressed any confidence in the overall strategy succeeding while the remainder
were evenly divided between a lack of confidence or being unsure.
Looking at specific
policies, a £1.1 billion fund to unlock strategic sites, including new
settlements and urban regeneration schemes, was viewed by far as the most
effective to boost housebuilding (37%). This was followed by lifting Housing
Revenue Account borrowing caps for councils in high demand areas (18%) and
adding £2.7bn to the Housing Infrastructure Fund (16%).
Despite the
constraints that firms have been facing recently, chartered surveyors remain
optimistic about the outlook for the year ahead. The RICS survey is forward
looking in comparison to official data, and net balances of 48% and 35% of
respondents expect workloads and employment levels, respectively, to continue
to rise over the coming 12 months.
Workloads are now
reported to be increasing across all geographic regions, particularly in the
Midlands and North. Over the past year or two, however, the pace of growth in
the infrastructure sector has slowed noticeably in Scotland with surveyors now
reporting the first decrease in activity since Q3 2016. This has been somewhat
offset by an improvement in workloads in Northern Ireland.
Higher input costs
and a shortage of labour continue to restrict growth in profit margins, with a
net balance of +12% of respondents expecting a rise in margins over the coming
year, unchanged from the previous quarter. This is likely to have impacted tender
pricing as well, with 56% more respondents in both the building and civil
engineering areas envisaging greater price pressures.
"Activity in
the construction and infrastructure sectors continues to expand despite
uncertainties related to Brexit and recent market events," said Jeffrey
Matsu, RICS Senior Economist.
"While
expectations for the year ahead remain positive, surveyors express very limited
faith in the government’s national strategy to deliver on its revised housing
delivery target.
"Capacity
constraints notwithstanding, the ability of the sector to contribute more
sustainably to economic prosperity will depend largely on more coherent
policies addressing issues ranging from workforce development to local planning
and permissioning."
