Construction schemes across the North West rose last year

Construction schemes grew across some of the North West’s property sectors in the last quarter of 2018, according to the latest RICS Construction and Infrastructure Market Survey.

During the last quarter of the year, growth in workloads on infrastructure projects – such as energy, road, rail and water – grew, with 38% more respondents reporting a rise in such activity.

This was closely followed by private housing, with 29% of contributors reporting an increase in workloads.

Encouragingly, more respondents also saw more output for public housing during the last quarter of 2018, with 23% of the region’s construction professionals seeing a rise in workloads for public housing.

However, workloads on private commercial projects fell during Q4 2018, with only 9% of respondents reporting a rise in such activity.

Workloads on private industrial projects also fell during the last quarter of the year with 10% seeing an increase in activity, down from 23% in Q3 2018.

Anecdotal evidence from respondents suggest that the housing market slowdown, coupled with ongoing policy ambiguity related to Brexit, is weighing on business investment decisions.

When asked how business enquiries for new projects or contracts have fared in the past three months, 10% more respondents reported an increase in enquiries, rather than a decrease, compared to 24% in Q3.

Another obstacle for investors is finance, with 78% of surveyors citing financial constraints as the most significant impediment to building.

When asked how credit conditions have changed over the past three months, 20% more respondents reported a deterioration rather than improvement.

Furthermore, despite the shortage of skilled labour having eased during the last quarter of the year, the lack of construction workers continues to pose a significant challenge for half of our respondents, particularly with regard to professional services such as quantity surveying.

Over 60% of surveyors expressed the view that workers from the EU were not important to their hiring requirements of surveying professionals, but the solution to this issue remains firmly domestic within the training and education areas with 68% of contributors citing education as the most effective policy tool in addressing the current skills dilemma, compared to 15% for immigration.

However, as the Brexit deadline draws near it should be noted that EU nationals are an important part of the mix particularly with regards to addressing the skills issue in increasing capacity to build on construction sites.

With EU nationals accounting for eight percent of the UK’s construction workforce, this accounts for well over 175 thousand people, according to recent RICS figures.

Brian John Boys of B&E Boys in Rossendale said: “The shortages of staff in the public sector is slowing progress on planning or infrastructure decisions.”

Looking further ahead, tender price expectations over the next twelve months are expected to be squeezed with 51% and 40% more respondents envisaging greater price pressures in the building and civil engineering areas, respectively. The expected increase in tender prices reflects higher input costs and ongoing competitive bidding pressures for businesses.

Nonetheless, 25% more contributors in the North West expect activity to rise rather than fall over the next 12-months (down from 32% in Q3), and a net balance of 18% foresee an increase in hiring over the next 12 months.

Anthony Dillon of Willmott Dixon in Manchester commented: “The better contractors, supply chain and consultants continue to be selective in assessing opportunities; a sensible budget, procurement route and good relationships are key.”

Jeffrey Matsu, RICS Senior Economist commented: “The additional £1 billion in additional HRA borrowing to fund council housing has begun to stimulate activity. The subsequent scrapping of the cap in last year’s Budget has the potential to accelerate this positive trend in the public sector over the coming years.

“Capacity remains an ongoing constraint for activity more broadly. However, with surveyors reporting a ramping up of new hiring even despite a moderation in business enquiries, continued access to a qualified pool of non-UK workers to support this growth will be as important as ever, particularly for work on construction sites.”