Financial issues ’cause construction slow-down’

The Royal Institute of Chartered Surveyors (RICS) has published its Construction and Infrastructure Market Survey for Q2 2018 showing a slow down in overall construction activity in the Midlands, which it blames on increasing problems with access to finance for builders, developers and others in the sector.

80% of respondents to the RICS survey said that financial constraints were a limiting factor to building activity, which is the joint highest reading in five years. Lack of access to to bank finance and credit, cash flow and liquidity challenges and ‘less favourable cyclical market conditions’ are the chief reasons cited in the report for the overall slow down in activity in the region.

Other limiting factors cited in the report, apart from financial ones, are planning delays, restrictive regulations and labour shortages, though the latter is now seen as a less prominent factor. On top of that, what the report describes as ‘anecdotal evidence’ indicates that the housing market slow down, coupled with anxieties about Brexit, is weighing on investment decisions, which in turn are contributing to a fall in construction activity.

Jeffrey Matsu, RICS senior economist said: “Although growth in the sector has moderated, ongoing capacity constraints have ensured a steady pipeline of work for the year ahead. With businesses continuing to hire to meet this pent up demand, the effects of any uncertainty generated by Brexit, or recent market events, including Carillion, may only become more evident in the longer-term.”

Despite growing uncertainties the report shows a general belief that construction activity across the Midlands will rise rather than fall further over the next 12 months, but with greater price pressure in the building and civil engineering areas most affected. The expected rise in tender prices may also signal a fall in profits – which will impact the ability of many firms to plan and invest – as well as a sharp rise in their input costs.

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