Workloads remained
resilient despite bad weather and a weaker near-term economic outlook, in the
first quarter of 2018 – according to the results of the Q1 2018 RICS
Construction and Infrastructure Market Survey.
In Q1 2018, 23% more
chartered surveyors reported that their workloads had risen as opposed to
fallen. While 63% of respondents noted bad weather conditions as a
limiting factor, the “Beast from the East” was not enough to slow the pace of
growth.
The RICS quarterly
series has now indicated moderate but steady growth for the past four quarters,
something supported by the positive expectations expressed by surveyors in
their forecasts a year ago.
In the early part of
2018 workloads increased across all subsectors, with both new work and repair
and maintenance activity rising steadily.
Private housing
reported the strongest rise in workloads with 36% more respondents citing an
increase rather than a decrease - the most positive since the beginning of
2016. This contrasts with the public sector where the pace of workloads slowed
to a net balance of +10% in housing (+19 in Q4 2017).
In infrastructure,
21% more contributors reported a rise rather than a fall in activity, and
nationally, respondents expect the rail and energy categories to post the most
significant increases over the coming 12 months.
Workloads are now
reported to be increasing across all geographic regions, with an acceleration
in the pace of growth in the Midlands and Southwest.
Higher input costs
and a shortage of labour continue to restrict growth in profit margins, and
while cost pressures may ease later this year, expectations on profit margins
are still well below the three-year average of 40% recorded between 2014 and
2016. Indeed, tender prices are expected to rise over the next 12 months with
respondents in both the building and civil engineering sectors envisaging
greater price pressures.
Besides the one-off
factors related to inclement weather, financial constraints, planning delays
and labour shortages remain the key impediments to growth with 76%, 66% and 60%
of surveyors reporting difficulties with each, respectively. In an extra question
added this quarter, 85% of respondents were of the view that small and
medium-sized firms are the most impacted by constraints on financing.
The lack of
sufficiently skilled workers remains an obstacle for many businesses,
particularly with regard to professional services such as quantity surveying.
Labour shortages remain at elevated levels after having eased throughout 2016
with 60% of contributors in Q1 citing this as an impediment to growth.
Indeed, the share of
respondents reporting insufficient availability of quantity surveyors was the
highest in ten years.
Despite the
constraints that firms have been facing recently, surveyors remain relatively
upbeat. Net balances of 46% and 35% of respondents expect workloads and
employment levels, respectively, to continue to rise over the coming 12 months.
While a short-lived
snowstorm may have snarled logistical supply chains and site works at the end
of February, it was not enough to negatively impact on workload order books.
Indeed, several years of limited spare capacity have resulted in a backlog within
the delivery pipeline which will take some time to unwind. Risk aversion by
both lenders and developers, in the wake of Carillion and ongoing Brexit
negotiation, will continue to weigh on investment decisions.
