Industry

11 NOV 2019

BREXIT UNCERTAINTY CONSTRAINS CONSTRUCTION SECTOR OPTIMISM, SAYS NEW RICS SURVEY

The uncertain outlook for the UK economy has led to reduced optimism, according to the results of the Q3 2019 RICS UK Construction and Infrastructure Market Survey, with anecdotal evidence from respondents suggesting that the housing market slowdown, coupled with unrelenting Brexit and political uncertainty, is weighing on investment decisions.

With the country heading towards a third general election in five years, the survey found that the mood in the construction sector is downbeat in the face of financial constraints, skills shortages, and slim margins.

The survey’s key findings include:

  • Workloads fall across most construction sectors in the UK as Brexit impacts investment;
  • Despite a lack of new business enquiries and rising labour costs, firms continue to hire;
  • 40% believe that Build to Rent will be a game-changer in increasing housing supply within ten years;
  • 53% of respondents seeing modern methods of construction feature more prominently in projects over recent years.

The survey results point to a notable deceleration in workloads, this quarter, with only a net balance of +10% reporting an increase in total workloads, down on average from +33% between 2013 and Q2 2016.

Breaking this down, workloads in the commercial and industrial sectors are at a near standstill, with infrastructure reporting the strongest rise, a net balance of +18% more respondents citing an increase rather than a decrease in infrastructure workloads (compared to +20% in Q2).

Activity in both private and public housing has eased with net balances of +14% and +11%, respectively. (Down from +26% and +22% in Q2). 

As this seems to suggest it will be difficult to fulfil the current government’s house building ambition, the survey found that 40% believe that build-to-rent will be a game-changer in increasing housing supply within ten years, and 53% of respondents said that modern methods of construction have featured more prominently in the projects they have evaluated or undertaken in the past three years. 

Jeffrey Matsu, RICS chief economist, said: "As the country heads to its third general election in five years, the mood music across the sector is relatively downbeat. However, while the pace of construction activity has moderated since the referendum, order books remain full as surveyors work through a backlog of previous projects.

"The outlook has the potential to materially improve, depending on the amount of fiscal spending that is authorised by government in the next spending review. Such pump priming has disproportionately supported construction and infrastructure works in the past."

Hew Edgar, RICS head of government affairs, said: "The UK's construction sector has shown resilience in its contribution to the economy over a difficult decade. We are, however, at a national level seeing issues such as financial constraints, skills shortages, stagnant productivity, variable quality, output lagging behind target, and slim margins. Whilst not the panacea to resolve all these problems, off-site manufacture and modern methods of construction represent an opportunity to address many of these issues.”

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