Sentiment in the construction sector began to decline again in the second quarter of the year, as fears over the scale of public spending cuts and ongoing uncertainty about prospects for the economy hit the industry, says the latest RICS Construction Market Survey, published in August.
Despite some encouraging signs at the beginning of the year, the latest data shows 20 per cent more surveyors reporting a fall rather than a rise in total construction workloads in the South West. This is in comparison to the previous quarter where 11 per cent more surveyors reported falling workloads.
Most sectors of the construction industry have shown signs of a drop in workloads, although private housing has seen some improvement within the region since the early part of 2010. Unsurprisingly, in light of cuts to budgets, public housing and other public works were the worst affected sectors, with the net balances sliding from -20 to -31 and 6 to -20 respectively in the South West, and 3 to -26 and 0 to -33 nationally. The large fall in the public works sector has been attributed to the suspension of the Building Schools for the Future programme (BSF).
Across the UK, the only regions which escaped falling workloads were the South East and London, however even here workloads only stabilised, rather than increased. Elsewhere, workloads fell, with Northern Ireland recording the worst reading.
Once again there was little change in South West for the number of surveyors reporting problems in procuring workers reflecting the competition among tradesmen for work as construction projects diminish. Alongside this, surveyors’ future expectations for employment revealed 28 per cent more surveyors in the South West expect employment to fall than rise over the next year, compared with 16 per cent anticipating a fall across the UK.
The outlook for output and profit margins has also turned more negative. Profit margin expectations have been the most adversely affected, with 59 per cent more surveyors expecting profits to fall rather than rise in the region.
Commenting, Andrew Covell, RICS South West spokesperson and Associate Director at Faithful+Gould, said: “This survey suggests that it is too early to conclude that the construction industry is on the road to recovery despite the strong contribution the sector appeared to make to the latest GDP data.
“Significantly, spending cuts are already having an adverse effect on sentiment and although the cost of tradesmen and overheads continue to fall, raw material prices are rising – creating a difficult operating atmosphere.
“Surveyors are also reporting an increase in competition for work as larger firms bid for smaller projects. Meanwhile, a continued lack of clarity from the government on existing and proposed projects is adding to the uncertainty. Given all these factors, it is of little wonder respondents to the survey are feeling gloomy.”
