Scottish construction sector ‘losing patience’ with Brexit indecision

The Royal Institution of Chartered Surveyors (RICS) has warned that the construction sector’s patience with Brexit-related indecision is wearing thin after its latest industry survey found that businesses are being forced to “proceed cautiously” through the uncertainty.

The Q2 2019 RICS Construction and Infrastructure Market Survey found that growth in Scotland’s construction sector accelerated in the latest quarter as businesses became “fed-up” with the Brexit delay.

This quarter, 21% more respondents in Scotland reported an increase in construction workloads, up from a +2% net balance in Q1. Interestingly, workloads in public housing grew at the fastest pace with a net balance of 52% more respondents reporting an increase in activity, up from -30% in Q1. This was closely followed by growth in private housing workloads.

Following a dip in Q1, workloads in the infrastructure sector in Scotland improved slightly in Q2 and there was also modest growth in commercial and public non-housing activity. Looking to the year ahead, workloads are expected to be most resilient in the private housing and infrastructure sectors with 27% and 25% more surveyors, respectively, anticipating activity to rise rather than fall across the UK.

Business enquiries for new projects or contracts in Scotland continued to grow this quarter as 27% more respondents reported an increase rather than a decrease over the past three months – from 7% in Q1. However, capacity continues to constrain potential activity with 30% more surveyors across Scotland having to increase headcount in the past three months to support new work, despite the ongoing recruitment challenges.

On a UK level, other obstacles to growth cited by respondents include access to finance, which continues to be the biggest impediment to building activity (69%). Although 18% more respondents reported a deterioration in credit conditions over the past three months, year-ahead expectations have become somewhat less restrictive.

Despite an increase in hiring intentions, skill shortages continue to pose a significant challenge to the Scottish construction sector with more than half of respondents (61%) saying there is a shortage of quantity surveyors. This is underscored by rising labour costs with a net balance of 73% of respondents foreseeing an increase over the coming twelve months across the UK.

Despite the continued Brexit uncertainty, the RICS market confidence indicator – a composite measure of workload, employment and profit margin expectations over the coming twelve months – rebounded to 21% (from 13% in Q1). Investments related to equipment, software and worker training are expected to gather pace as well. However, for the fourth consecutive quarter, profit margin expectations remained flat and tender price expectations eased.

RICS senior economist, Jeffrey Matsu, said: “Three years on and the long, unrelenting shadow of Brexit uncertainty is testing the mettle of the construction industry. After a prolonged period of delays and underinvestment, businesses now appear to be fed up and are proceeding cautiously with new hiring and intentions to invest.

“With the range of possible outcomes related to Brexit as wide as ever, we expect to see continued volatility in the construction output data but in the meanwhile foresee workload activity stabilising.”

Tags: RICS, Brexit

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