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 suggests that the housing market slowdown, coupled
with unrelenting Brexit and political uncertainty, is weighing on investment
decisions.
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 housing building ambition, we asked two additional
questions this quarter to assess how the industry might help address housing
supply. The results show that 40% believe that Build to Rent will be a
game-changer in increasing housing supply within ten years; and that 53% of
respondents are of the view that modern methods of construction have featured
more prominently in the projects they have evaluated or undertaken in the past
three years. Which is likely to positively impact delivery speed, and capacity
issues.
Workloads for the
year ahead however, remain positive with respondents expecting the private
housing and infrastructure sectors to be the most resilient. Within
infrastructure, the energy, rail and roads subsectors are expected to see the
strongest growth for the year ahead, alluding to possible dependence on HS2,
Crossrail and Transport for the North's network of programmes.
The survey continues
to highlight financial constraints to be the most significant impediment, with
a net balance of +68% of contributors citing this. Respondents also report a
deterioration in credit conditions over the past three months, and they continue
to have concerns over planning delays and regulations.
Whilst the survey
has long highlighted a lack of access to skilled labour, this quarter the
shortage of skilled professionals is not as severe as it has been, with 41% of
respondents citing this as an obstacle to growth, the joint lowest net balance
in over five years. Despite current market conditions, 28% of respondents are
reporting an increase in headcount over the past three months.
Jeffrey Matsu, RICS
Chief Economist, comments: "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, adds: "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, offsite manufacture and modern methods
of construction (MMC) represent an opportunity to address many of these issues,
and we therefore welcome the establishment of a Champion for MMC.
"MMC can
supplement existing capacities, support alternative models for delivery (AMD),
increase delivery rates while reducing energy use in the development process.
We firmly believe that once fully embraced and embedded, MMC will improve our
capacity to assist housing demand.
"We urge the
future Government to support MMC both directly through investment and
indirectly through encouraging and incentivising construction of further MMC
factories in areas of high unemployment as part of the Industrial Strategy and
strengthening its presumption in favour of MMC in public infrastructure
schemes."
