Construction sector optimism weakens as workloads fall

The housing market slowdown, coupled with political uncertainty is weighing on investment decisions, and leading to reduced optimism in Yorkshire and Humber’s construction sector.

This is according to the results of the quarterly RICS Construction and Infrastructure Market Survey.

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.

Looking at the region’s property sectors; construction activity on private housing schemes fell during quarter three, with 25% of respondents reporting a rise on private housing projects (down from 43% in quarter two).

Meanwhile, a moderate 22% of contributors saw an increase in public housing starts in quarter three (a small increase from 21% in quarter two).

A RICS UK spokesman said: “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 ten years; whilst 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 Yorkshire and Humber’s commercial and infrastructure sectors, only 5% of the region’s construction professionals saw a rise in activity on commercial developments during quarter three (down from 14% in quarter two).

13% reported an increase in activity on infrastructure schemes – such as rail and road networks – during quarter three, down from 22% in quarter two. Construction activity in the industrial sector also failed to pick-up during Q3.

Mark Harrington of Homes England in Leeds said: “The ongoing uncertainty concerning Brexit appears to be slowing investments / development starts.”

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.

Whilst 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 quarter three – down from 38% in quarter two.

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