More bad news for UK

Another survey has shown that UK construction is slowing in the period following the decision to leave the European Union (Brexit), with the third quarter Construction Market Survey from the Royal Institution of Chartered Surveyors (RICS) finding that financial constraints and lack of investment are continuing to hamper growth.

However, it also predicted that the outlook would improve, with nearly 50% more respondents forecasting a rise in workloads over the coming year.

As with recent GB figures from the Office for National Statistics (ONS), the RICS survey showed that the majority of UK construction sectors were experiencing a slowdown in growth, as Brexit uncertainty continued to cause concern.

While 19% more chartered surveyors reported that construction workloads in the UK had risen this quarter, RICS said this was a significant slowdown on the trend growth over the previous three years. It said it was the lowest reading since the second quarter of 2013.

The English Midlands were said to have remained the engine of growth in UK construction, with 30% more respondents reporting a rise in activity, while RICS said London and the South East of England had seen growth levels “moderate significantly”. It said this was largely because of a slowdown in activity in the private commercial sector.

Private housing saw the highest levels of growth compared to other construction sectors, with 27% more chartered surveyors reporting workloads had risen rather than fallen. In the private commercial sector, growth was unchanged from the second quarter.

In the infrastructure sector, 17% more contributors reported a rise rather than a fall in workloads, and respondents expected the road and rail subsectors to be the drivers of growth over the next 12 months. Meanwhile, activity in the public sector continued to underperform all others, the survey found.

Jeremy Blackburn, RICS UK head of policy, said, “It seems that when it comes to private housing, we are indeed the builders. The government’s commitment to this critical sector has clearly had a positive impact on growth.

“However, what the figures mask, is the disparity between the kinds of properties that are being built.”

He said that when the Communities Secretary published his planned Housing White Paper later this month, “he must deliver a housing programme that benefits more than the just the fortunate few. We need to shift the rhetoric away from home ownership and encourage the building of affordable rental properties in the suburbs and our cities.”

He added, “While the Midland’s engine – driven by high speed rail programmes – is building up steam, we expect the Chancellor to initiate a wave of smaller infrastructure schemes, whether new build, repair or upgrade, across the transport network.

“As the UK prepares for the changes ahead, the ability to move people, goods and services more effectively will be vital and we expect locational investment in road, rail, air and sea ports. Government must continue to reassure and encourage investors in the coming months so that improvements to UK infrastructure can continue.”

Further ahead

Looking further ahead, RICS said that while respondents highlighted generally subdued growth over the third quarter, they were more optimistic about the year to come, with 49% more respondents forecasting a rise in workloads rather than a fall.

On average, contributors expected activity to rise by 2.5% over the next 12 months, said RICS.

It added that expectations for employment growth had also improved with 35% more respondents forecasting a rise rather than a fall, up from 18% in the second quarter.

However, both workload and employment expectations are still lower than levels before the second quarter, and RICS said that anecdotal evidence from respondents suggested that uncertainty relating of the UK’s future relationship with Europe was still causing them concern regarding their future workloads.

In the third quarter, financial constraints remained the most significant impediment to growth, the survey found, and RICS said this was anecdotally linked to uncertainty, with 69% of contributors reporting such constraints to be holding back growth. Planning and regulatory delays were said to be the next most substantial factor with 55% of respondents citing problems in this area.

Growth in output costs rose at a more moderate pace, it reported, with a net balance of 28% of contributors seeing a rise rather than a fall over the quarter. Meanwhile, input cost continued to increase firmly with a net balance of 48% of respondents reporting a rise, said RICS.

Simon Rubinsohn, RICS chief economist, said, “The picture painted by the third quarter survey is one of subdued growth, and although expectations have improved following the immediate shock of the vote to leave the EU, anecdotal evidence from respondents suggests that much uncertainty still remains on the outlook for the year ahead.”