The RICS UK Construction Monitor Q4 2023 shows the sector to be a touch less pessimistic compared to the results of the prior quarter, with hopes and expectations of a cut to interest rates at some point in 2024 increasing optimism.
However, while this shift is noticeable, it is moderate, and most key metrics continue to show caution.
Workload trends overall became less negative with the headline figure now recording a -8% figure which is marginally stronger than the -10% recorded in Q3. When we look at workloads by each sector, a clear divergence exists between infrastructure and the others, with it reporting a +9% growth reading.
On the other hand, private housing workloads remain in negative territory (-21%). Most pessimistic is the reading for public housing, which deteriorated from -7% to -14% this quarter.
Pressures around skills shortages persist, with them hampering construction activity. Skill shortages in specific areas remain acute. So for example, roughly the same proportion of respondents point to shortages of both quantity and building surveyors and an even higher share identify problems recruiting sufficient skilled trade workers. Given these challenges, it is perhaps unsurprising that the industry continues to demonstrate its commitment to expanding training and the upskilling of professionals - +19% report a rise in planned investment in training, which is slightly up on the +17% reported in Q3.
To overcome skills shortages, RICS wants the UK Government to establish a skills taskforce to identify gaps and opportunities. It also wants the government to invest in apprenticeships in built environment roles, as well as provide incentives, such as tax credits, to companies that invest in skills training. RICS is ready to assist in developing a dedicated English Built Environment GCSE, which would inspire the next generation to careers in the sector.
Overall, while the UK’s construction sector remained fairly subdued at the tail end of 2023, belief in a rate cut in 2024 appears to be supporting greater expectations for the future, with the twelve-month outlook appearing especially positive.
Tarrant Parsons, Senior Economist at RICS, said: “Although current conditions across the UK construction industry remain relatively subdued, the latest survey feedback shows a gradual improvement in forward-looking sentiment. Supported by the prospect of easing interest rates later this year, overall workloads are anticipated to rise, with respondents anticipating this pick-up will be accompanied by a rise in employment levels across the industry.
“That said, the challenge around existing skills shortages remains a persistent theme in the Q4 results.”
