The headline reading from the RICS UK Construction Monitor for Q3 2023 shows a net balance of -10% of respondents reporting a decrease in activity this quarter – the worst result since the early months of the Covid-19 pandemic.
Despite the generally negative picture, some sectors have remained buoyant. Infrastructure is still growing although at a lower rate (+10%, compared with +17% in the second quarter of the year) and public sector work is up +8% (+14% in Q2 2023). But these apart, all other sectors are now seeing a fall.
The biggest fall is in private house-building where the net balance has fallen from -12% in Q2 to -26% in Q3 – the result of slower sales and tougher pricing, says RICS.
Public sector housing, private industrial and private commercial workloads are also on the slide. New business enquiries across the whole sector are also now in negative territory, dropping from +6% in Q2 to -2% in Q3.
The RICS Construction Monitor notes that a net balance of +38% of respondents report that the credit environment is becoming more restrictive, and two thirds of contributors view finance as limiting current activity. A higher number of respondents are also now saying that inadequate demand is impacting business plans, this measure has been steadily climbing and is now at its highest level since the final three months of 2020.
As workload drops, difficulties in recruiting staff continue to ease although they still remain significant, says RICS. Just over half of the contributors to the survey cite labour supply as an issue with around 40% of respondents having difficulty finding key skills such as bricklayers, carpenters, plumbers and electricians. There is also a shortage of quantity surveyors with around half of the respondents reporting difficulty finding qualified professionals to fill vacancies.
Looking ahead, only around one-third of respondents expect an increase in productivity over the course of the next year.
Sam Rees, senior public affairs officer at RICS, said: “The latest reported drop in housebuilding highlights the urgency to launch a structured, holistic plan for tackling the housing crisis. While the government's recently announced intention to meet its target of one million new homes before the end of this parliament is laudable, detail on how this will be achieved is still missing.
"The RICS Manifesto for the Built Environment sets out a comprehensive and ambitious housing delivery strategy that focuses on local needs, skills investment and the creation of new homes through building and conversions, incorporating crucial planning reforms and innovations.”
RICS chief economist Simon Rubinsohn, said: “The tougher environment around the housing market is now coming through in terms of a slowing in the build out rate of new developments according to feedback from RICS members. This suggests that housing supply is likely to fall at least for the next year compounding the problems already being faced by many of those looking to get a first step on the property ladder or move into the rental market. In contrast, the trend in infrastructure work is still positive albeit less so than previously.
“Chiming with growing concerns about the rising level of insolvencies in the sector, the survey also highlights the tougher credit environment being faced by many developers. Significantly, financial constraints are now viewed as the major challenge by the industry.”
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