Construction sector optimism weakens in North West as workloads fall

The housing market slowdown, coupled with unrelenting Brexit and political uncertainty, is weighing on investment decisions and leading to reduced optimism in the North West’s construction sector, according to the results of the quarterly RICS Construction and Infrastructure Market Survey, published today.

The survey results point to a notable deceleration in workloads, with 13% of the region’s construction professionals reporting a rise in workloads during the third quarter of the year, down from 21% in the second quarter of the year.

Looking at the region’s property sectors construction activity on private housing schemes fell during Q3, with 25% of respondents reporting a rise in work on private housing projects, down from 43% in Q2.

Meanwhile, a moderate 22% of contributors saw an increase in public housing starts in Q3, a small increase from 21% in Q2.

These results are not encouraging given the Government’s commitments to address the UK’s housing supply issue and seem to suggest it will be difficult to fulfil housing build ambition.

However, when questioned around how the industry can help address housing supply, 40% of contributors believe that Build to Rent will be a game-changer in increasing housing stock within 10 years, while 53% 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.

This is likely to positively impact delivery speed, and capacity issues.

Looking at the North West’s commercial and infrastructure sectors only five per cent of the region’s construction professionals saw a rise in activity on commercial developments during Q3, down from 14% in Q2, while 13% reported an increase in activity on infrastructure schemes, such as rail and road networks, during Q3, down from 22% in Q2.

Furthermore, construction activity in the industrial sector also failed to pick-up during Q3.

The survey continues to highlight financial constraints to be the most significant impediment, with 68% of contributors citing this.

Respondents also reported a deterioration in credit conditions over the past three months, and they continue to have concerns over planning delays and regulations.

While the survey has long highlighted the issue of a lack of access to skilled labour, this quarter the shortage of skilled professionals is not as severe as it has been, with 31% of respondents citing this as an obstacle to growth in Q3, down from 38% in Q2.

Looking ahead, sentiment for workloads over the next 12-months eased in Q3, with 32% of respondents anticipating construction activity rising over the year ahead, down from 40% in Q2.

James Clifford, of James Clifford Associates, said: “The Government needs to fast-track road schemes rather than take four/five years to get on site.

“The North West, in particular, needs to get more infrastructure schemes under way before we lose even more quantity surveyors and the skills shortages get worse.”

Jeffrey Matsu, RICS chief economist, added: “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.”