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A slow start to the year?

The RICS UK Residential Market Survey for January highlights that 2019 is off to a slow start, showing a subdued backdrop as enquiries, sales and new instructions all fall further.

In the near term, contributors sense little prospect of a turnaround, as concerns over the potential impact of Brexit, alongside affordability constraints continue to cause buyers and sellers to hesitate. However, expectations at the 12-month horizon are modestly positive.

During January, new buyer enquiries fell again at the headline level marking the sixth successive monthly decline. What’s more, demand declined to some degree across virtually all parts of the UK. Scotland was a slight exception, but even there the trend was only flat.

Alongside weakening demand, the number of new properties being listed on the sales market also deteriorated, with the net balance reading of -25% the weakest since July 2016.

Rounding off a subdued month for market activity, agreed sales also fell further, with the pace of decline seemingly gathering momentum compared to December.

Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the South East where affordability remains stretched and the tax changes are most penal remains to be seen.

A brighter outlook for the next 12 months?

Sales expectations for the coming three months remain downbeat, both at the national level and across most parts of the UK with expectations negative in 11 of the 12 regions/countries covered. The outlook over the next 12 months is stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise.

Prices also continued to slip, as the headline price indicator declined for the fourth month in succession, with the net balance easing to -22%. When broken down, London and the South East continue to display the weakest readings, followed by East Anglia and the South West. In these regions the strong price growth over the past six years has left affordability looking stretched, with the high prices a key factor hampering demand. Elsewhere, prices continue to rise in Northern Ireland and Scotland.

Mixed news in the lettings market

Across the lettings market, tenant demand rose modestly in the three months to January (seasonally adjusted series). It has now picked up in each of the last three quarters. Nevertheless, nationally new landlord instructions continue to dwindle, remaining in negative territory for an eleventh successive quarter. Respondents expect rents to rise by roughly 2% over the next 12 months, and at the five-year horizon, averaging 3% each year.

Simon Rubinsohn, RICS chief economist, said “Although some contributors to the survey have taken comfort from a better start to the year than anticipated, a larger proportion are continuing to find the market a difficult one in which to do business.

“Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the South East where affordability remains stretched and the tax changes are most penal remains to be seen.

“Meanwhile, the lettings market is continuing to see instructions fall away as investors respond to the emerging fiscal and regulatory landscape. This is resulting in feedback consistent with further increases in rents across the country, to a greater or lesser degree, over the next 12 months.”

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Artificial Intelligence: What it means for the built environment

The RICS has launched an insight paper which explores the impact of using artificial intelligence (AI) in the built environment, and the urgent need for industry professionals to understand how it will influence their role, as the future will rely less on human labour and more on technology.

AI in FM

One sector that the Artificial Intelligence: What it means for the built environment highlights as facing a significant impact of AI is facilities management (FM), due to the labour-intensive and repetitive nature of many FM jobs, making it an ideal place for automation of previously human-dominated tasks. However, the report weighs up the positives and negatives of such changes and how companies should deal with them.

Paul Bagust, RICS Global Property Standards Director says “FM will always have a vital role to play within the built environment, and even though many operational roles will become more technology-led, the sector could benefit hugely from AI at a strategic level. For example, machinery utilising AI will revolutionise the FM industry, making many jobs faster, safer, less costly and this will ultimately improve a company’s service offering and increase their bottom line.

“Technology and the availability of data is also changing the way investors look for opportunities and invest. This will present a huge threat to the industry if ignored, but, again, it presents so many opportunities for those who work in the built environment. So, all businesses, however large or small, must act now and analyse and prepare for how this disruptive technology could transform their role, sector and the wider built environment — otherwise they face becoming obsolete.”

Chris Hoar, co-founder of AI in FM added “The paper discusses how AI will transform the property industry by driving smart, efficient buildings from design through to construction. It also highlights how those in the industry can exploit the latest AI applications and developments, including drones and BIM (Building Information Modelling), to plan and work more effectively, while improving and better maintaining the quality of buildings and the wider built environment.

“The overarching message of this report is that organisations should seek out and maximise the opportunities that artificial intelligence presents, while minimising any potential threats. This way, they will have a much better chance of controlling their business strategy, direction and financial health.”

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Optimism for construction workloads in the UK

There is optimism for construction workloads in the UK, despite uncertainties around Brexit weighing on investment decisions, and various market constraints, according to the results of the Q4 2017 RICS Construction and Infrastructure Market Survey.

Survey highlights:

  • Only 12% of respondents expressed any confidence in Government strategy succeeding to hit housing target
  • Brexit uncertainties continue to weigh on investment decisions
  • Outlook for workloads and employment growth improves amid ongoing capacity constraints

View and download the survey

Workloads rise

In Q4 2017, 21% more chartered surveyors reported their workloads to have risen despite financial constraints, labour shortages and planning delays remaining key impediments to growth with 80%, 60% and 60% of surveyors reporting difficulties with each, respectively. Comments from some respondents suggest that stricter conditions being placed on firms by financial institutions are limiting growth, which most likely reflects increased caution given cyclical market conditions and Brexit considerations.

The lack of sufficiently skilled workers also remains an obstacle for many businesses, particularly with regard to professional services such as quantity surveying – only in 2007 had the share of contributors highlighting this as a concern been higher.

Also measured in the Q4 2017 survey was an assessment of how contributors feel about the wide range of policies included in the Autumn Budget and Housing White Paper to lift housing delivery to 300,000 units per year. Nationally, only 12% of respondents expressed any confidence in the overall strategy succeeding while the remainder were evenly divided between a lack of confidence or being unsure.

Policies

Looking at specific policies, a £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes, was viewed by far as the most effective to boost housebuilding (37%). This was followed by lifting Housing Revenue Account borrowing caps for councils in high demand areas (18%) and adding £2.7bn to the Housing Infrastructure Fund (16%).

Despite the constraints that firms have been facing recently, chartered surveyors remain optimistic about the outlook for the year ahead. The RICS survey is forward looking in comparison to official data, and net balances of 48% and 35% of respondents expect workloads and employment levels, respectively, to continue to rise over the coming 12 months.

Pace of growth

Workloads are now reported to be increasing across all geographic regions, particularly in the Midlands and North. Over the past year or two, however, the pace of growth in the infrastructure sector has slowed noticeably in Scotland with surveyors now reporting the first decrease in activity since Q3 2016. This has been somewhat offset by an improvement in workloads in Northern Ireland.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of +12% of respondents expecting a rise in margins over the coming year, unchanged from the previous quarter. This is likely to have impacted tender pricing as well, with 56% more respondents in both the building and civil engineering areas envisaging greater price pressures.

Jeffrey Matsu, RICS Senior Economist said “Activity in the construction and infrastructure sectors continues to expand despite uncertainties related to Brexit and recent market events. While expectations for the year ahead remain positive, surveyors express very limited faith in the government’s national strategy to deliver on its revised housing delivery target. Capacity constraints notwithstanding, the ability of the sector to contribute more sustainably to economic prosperity will depend largely on more coherent policies addressing issues ranging from workforce development to local planning and permissioning.”

Lewis Johnston, RICS Parliamentary Affairs Manager added “with only 12% of respondents confident that the Government’s overall housing strategy is sufficient to meet housebuilding targets, it’s clear more radical action is needed. As we said at the time of the Autumn Budget, the smorgasbord of policies set out by the Chancellor did not amount to the fundamental step-change we need to really shift the dial on housing.

“In practical terms, the Government should go further with the policies respondents felt will be most effective, such as the £1.1 billion fund to unlock strategic sites. In addition to the partial lifting of the Housing Revenue Account borrowing cap, councils should also be given the tools they need to build, including more access to funding and a pipeline of suitable land. The fact that 60% of survey respondents cited labour shortages as a serious constraint to growth underlines to need to tackle skills shortages in construction, and move the sector towards higher-tech, less labour intensive production methods.”

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Skills shortages biting construction sector once more

Workloads in UK Construction and Infrastructure continued to rise in Q3 2017, according to the latest RICS UK Construction and Infrastructure Market Survey, with 22% more respondents seeing a rise in workloads of the quarter, with a steady pace of growth.

However, while activity remains steady, comments left by respondents continue to highlight Brexit-related uncertainties as weighing on investment decisions and the lack of sufficiently skilled workers also remains an obstacle for many businesses.

Shortage of skilled workers

Having eased throughout 2016, the intensification of labour shortages is biting once more in the quarter with 62% of contributors citing this as an impediment to growth. This contrasts with an average of 40% when data collection first began in 2012. Within this, respondents to our survey are still seeing a lack of quantity surveyors (64%) as well as other professionals (52%). 44% are also seeing a shortage of workers within specific trades.

Despite government efforts to bolster the workforce and the prominence of apprentices, through an apprenticeship levy introduced earlier this spring, only 42% of respondents feel that government-funded programmes are moderately effective, with one-third unsure. The quality of the talent pipeline is insufficient as well – less than half (45%) of employers who currently hire apprentices view them as a long-term solution to their hiring needs.

Sector workloads

Breaking the rise in workloads and activity down to a sector level, growth is strongest in the private housing sector, while remaining broadly stable elsewhere. Meanwhile, the public non-housing sector continues to underperform all others. In infrastructure, 21% more contributors reported a rise rather than a fall in workloads. Nationally, respondents expect the rail and energy sub-sectors to post the most significant increases in construction output over the coming 12 months.

Despite uncertainties, a net balance of 45% of respondents expect headline activity to continue to rise rather than fall over the year ahead. Nevertheless, this is down from the four quarters immediately preceding the EU referendum, which averaged 62%, reflecting a somewhat less optimistic outlook. Meanwhile, 30% more contributors expect employment to rise rather than fall (broadly unchanged from Q2).

Other impediments on construction growth

While a shortage of workers is hampering activity and profit margins, financial constraints are still reported to pose the most significant challenge, although the share of contributors expressing this view has come down to 69% (from 79% in Q2). Access to bank finance and credit remains by far the most frequently cited issue, followed by cash flow and liquidity. This likely reflects a more cautious stance by banks given cyclical market conditions and Brexit considerations.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of only +12% of respondents expecting a rise in margins over the coming year. This is likely to have impacted tender pricing as well, with 62% and 56% more respondents in the building and civil engineering areas, respectively, envisaging greater price pressures.

Jeffrey Matsu, RICS Senior Economist said “While activity in the sector has moderated, growth and growth expectations remain in positive territory. Uncertainties due to Brexit continue to weigh on companies’ investment and hiring decisions, and banks appear to be adopting a more cautious stance to providing finance. Meanwhile, challenges related to an inadequate supply of skilled labour are as pronounced as ever.”

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Skills shortages remain key challenge to infrastructure delivery

Construction and infrastructure workload expectations continue to improve with respondents the most positive since the referendum, according to the latest Royal Institution of Chartered Surveyors (RICS) Construction and Infrastructure Market Survey, Q1 2017. The pace of growth has increased across all sectors pointing to a widespread improvement in the sector.

In Q1 2017 27% more respondents reported an increase in workloads, (up from +18% in Q4 2016). Expectations for the next 12 months also remain firmly positive particularly for activity levels although they have reduced slightly in case of profit margins.

The shortage of skilled labour persists in UK infrastructure and construction and is again widely cited by contributors as a factor potentially impacting the performance of businesses working in the industry.

Looking at the different sectors, 34% more respondents cited an increase in private housing output rather than a decrease, which puts it above the other sectors for the pace of growth once again; this has been the case since Q1 2013.

While the commercial sector saw the largest growth in workload for the quarter (compared with Q4 2016) with 31% more respondents seeing a rise, infrastructure workloads continue to grow steadily with the most significant increases in rail, road and energy categories.

These sectors are also viewed as the most promising sectors in infrastructure for the next 12 months. Breaking this down, 60% of respondents felt that repair and maintenance work of existing structures is the most needed type of investment in their area whilst 40% felt investment in new projects was necessary.

Growing skills shortages

As workloads increase, skill shortages are still sighted as a significant problem to the industry with 53% of respondents stating a shortage of skilled labour to be a key impediment to growth.

This is slightly up from 50% in the last quarter. In recent reports, the proportion of respondents noting skill shortages to be the major barrier to growth had come down slightly but the latest results along with surveyors’ comments suggest labour shortage pressure across the UK construction sector is intensifying once more.

Alongside this, 65% of respondents reported insufficient availability of quantity surveyors, with skill shortages in this area becoming increasingly prominent since 2012. The results also point to the quality of available workers (rather than simply the quantity) being the principle driver in skill shortages, with 67% of respondents taking this view.

Looking at this further, 59% of contributors feel that improved education pathways and training would the most effective policy response to alleviate labour supply pressures, whilst 31% of contributors feel direct government subsidisation of training would be the most effective.

Financial constraints and their impact

Meanwhile, financial constraints are still the most significant obstacle to growth with 70% of respondents citing this as an issue. Planning and regulation remains a significant impediment to growth with 61% of respondents citing this as an obstacle (up from 53% in Q4 2016).

At the same time, tender prices are expected rise in the next 12 months. Specifically, 69% more respondents believe tender prices will go up in the building sector (rather than fall). The expected increase in tender prices may signal rising costs and shrinking profit margins which is also reflected in the 12 month expectation of profit margins easing from +26% in Q4 2016 to +18% in Q1 2017.

Regionally all parts of the UK have observed an increase in pace of output growth in Q1, with the exception of Northern Ireland. The was due to the pace of growth slowing within the infrastructure, private industrials and public non-housing sectors. Output growth gathered the most pace in London and the South East where the net balance rose from +7% to +22%.

Jeff Matsu, RICS Senior Economist said “The mood music in the construction sector has improved in line with the better tone to macro data more generally. However the survey does highlight some key challenges that need to be addressed if government’s ambitious plans for housing and infrastructure, in particular, are to be met. Access to finance, alongside planning and skill shortages, both quality and quantity, remain big obstacles to delivery and though some plans are in place to address these issues, it remains to be seen whether they are sufficient to make a meaningful impact.”

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Expectations for construction workloads regain lost ground

Expectations across the construction sector have now regained the ground lost post the EU vote, according to the latest Royal Institution of Chartered Surveyors (RICS) Construction Market Survey, Q4 2016.

  • National workloads still positive with the private housing displaying strongest momentum
    Road and rail set to be the fastest growing infrastructure sectors over next twelve months
    Expectations for workloads, employment and profit margins improve

An overview

Following a noticeable dip around the time of the EU referendum, expectations for output growth over the year to come strengthened for the second consecutive report. Indeed, the twelve month workloads expectations series improved to post a reading of +57% (following +49% and +23% in Q3 and Q2 respectively).

Alongside this, employment expectations improved for the second straight report, with 41% more respondents anticipating a rise in construction sector employment over the year to come. As such, both employment and workload expectations have now recovered to their pre-referendum levels.
The latest results point to modest growth across the sector in the final quarter of 2016, with 18% more respondents reporting an increase in total workloads. However, while the data is broadly positive, the anecdotal comments left by chartered surveyors do continue to highlight uncertainty surrounding the departure from the EU to be dampening investment and activity.

During Q4, output increased in most sub sectors except public non-housing. Following the pattern of the last three quarters, the strongest quarterly rise in workloads was reported in the private housing sector. 27% more respondents cited an increase in private housing workloads (rather than a decrease). A rise in workloads was also reported in the private commercial and infrastructure sectors.

Meanwhile, both output and input costs rose in Q4 2016 with input prices extending a run of uninterrupted growth stretching back to Q2 2010.

Forthcoming

Over the next twelve months, respondents continue to expect the road and rail sub categories of infrastructure to post the most significant increases in construction output at the national level. Regionally, expectations for growth in railway output lead the way in London, the North West, Yorkshire & Humberside, Wales and the West Midlands. Meanwhile, expectations for growth in road construction activity come out on top in all other areas of the UK.
Skill shortages continue to be a key impediment to growth in the sector, although they have eased in five consecutive reports. Interestingly however, the one area that remains a particular concern is the shortage of quantity surveyors with 66% of respondents highlighting a gap. This is the highest figure since 2008.

Jeremy Blackburn, RICS Head of Policy said “Many firms are currently having to bring construction professionals in from outside the UK. The lack of quantity surveyors consistently apparent in our survey is also underscored by the fact that, at the moment, under the government’s Shortage Occupation List, it is easier to employ a ballet dancer than a quantity surveyor.

“Even if we were to reverse this and also ensure that through Brexit we maintain access to EU workforce, we would still have a domestic shortfall of skills. The Industrial Strategy is a golden opportunity to align education, training and employer work paths – along with modern methods of construction – to ensure we have the skilled workforce to meet our building targets.”

Simon Rubinsohn, RICS Chief Economist, added “The latest results suggest that the construction sector has shrugged off concerns about the effect of Brexit with key workload indicators remaining firm around the country. Indeed, feedback regarding the outlook over the next twelve months is now rosier than it was back in the autumn with more building anticipated as 2017 unfolds.

“That said, there remains some unease about access to skilled labour in the emerging new world and financial constraints still remain a major challenge for many businesses. And significantly, we are being told that a shortage of quantity surveyors is impacting on the development process at the present time.”

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Construction workloads still rising despite uncertainty

Building activity is still rising despite uncertainty in the economy, according to the latest RICS (Royal Institution of Chartered Surveyors) and Tughans Northern Ireland Construction Market Survey.

Workloads were still rising in the third quarter of the year, according to Northern Ireland surveyors, with only a very modest slowdown in activity relative to Q2.

Housebuilding remained a key source of workload growth, with private housebuilding activity rising particularly strongly (a net balance of +48). Private Commercial activity was also rising relatively robustly (+23), according to the survey.

In contrast however, infrastructure workload growth remained weak (+5), and significantly below the UK average (+17).

Looking ahead, Northern Ireland surveyors are upbeat about the prospects for growth, with a net balance of +50% expecting workloads to be higher in a 12-month horizon.

The picture painted by the Q3 survey is one of growth, and expectations have improved following the immediate shock of the vote to leave the EU. However, Northern Ireland’s construction sector remains heavily dependent on work in GB, and the survey tells us, crucially, that infrastructure activity remains very subdued. There is also anecdotal evidence from respondents suggesting that uncertainty still remains on the outlook for the year ahead.

RICS Construction Spokesman for Northern Ireland, Jim Sammon said “Infrastructure investment from both the private and public sectors, is essential to delivering long term growth, particularly as we seek to continue to attract Foreign Direct Investment.

The latest survey chimes with much of the other data of late, which has pointed to a stronger economy than perhaps had been anticipated. Activity inside Northern Ireland itself may remain subdued, other than an uptick in residential development, but the local sector continues to find work outside of Northern Ireland, demonstrating the quality of the work our local professionals deliver. Clearly some uncertainty lies ahead, but on the positive side, the weakening of sterling could help increase the competitiveness of Northern Ireland companies working south of the border.” concluded Michael McCord, Construction Partner, Tughans Solicitors.

Read the full survey results here.
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Birmingham’s New Street Station crowned UK’s Project of the Year after £1bn revamp

Following a major £1bn redevelopment, Birmingham’s New Street Station has been crowned UK Project of the Year at the 2016 RICS Awards Grand Final.

The national RICS Project of the Year accolade is presented to the scheme which demonstrates outstanding best practice and significant benefit to their local area and wider economy. The redevelopment of Birmingham’s New Street station and Grand Central triumphed over 90 of the UK’s most impressive property schemes to gain the top award.

The Birmingham Gateway & Grand Central project – delivered by a team including Mace, Network Rail, Birmingham City Council and Turner & Townsend – was described by our judging panel as the most significant investment in regenerating Birmingham in a generation.

The new Birmingham’s New Street station and its former Pallasades shopping centre opened as Birmingham Grand Central in September last year. The £1bn scheme has transformed it into a popular retail and leisure destination and world-class station – five times the size of the original station – with a striking soccer pitch-sized atrium. Meanwhile, the new shopping centre – above the station – is now home to the biggest John Lewis outside of London and a mix of premium high street brands and eateries.

As one of Britain’s largest and most important cities, Birmingham deserves a station and shopping and leisure destination of this remarkable calibre. This investment in the city has created around 10,000 jobs and is expected to deliver around £2bn in economic benefits.

David Tuffin FRICS of Tuffin Ferraby Taylor LLP said “It is the catalyst for further regeneration in other parts of the city centre, which will create even more jobs. The team behind Birmingham Gateway and Grand Central should be extremely proud. 180,000 passengers continued to use the station during the works, yet they still managed to create a visually striking, yet practical international gateway into Birmingham, on time, from which the city, its residents and visitors will prosper from enormously.

“Each of these schemes is of an exceptional calibre. I’d like to extend a huge well done to the teams behind them as these projects are all positively contributing to their local communities and our country’s economy.”

Category winners from each of the 12 regional RICS Award ceremonies – held earlier this year – competed to win the national accolade in their respective category, with host, Gethin Jones, Broadcaster and TV personality announcing the winners.

The Grand Final winners:

  • Building Conservation: Mount Stewart, Newtownard (Northern Ireland)
  • Commercial: Landrover BAR America’s Cup HQ, Portsmouth (South East)
  • Community Benefit: Alder Hey Children’s Hospital, Liverpool (North West)
  • Design through Innovation: Black Rock Quarry, Portishead (South West)
  • Infrastructure: Emergency Care Centre, Queen Elizabeth Hospital, Gateshead (North East)
  • Regeneration: Birmingham Gateway & Grand Central, Birmingham (West Midlands)
  • Residental: Romilly Quarter, Barry (Wales)
  • Tourism & Leisure: NT Future, South Bank (London)
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Without skilled migrant workers the UK faces construction crisis, warns experts

Secure post-Brexit access to a skilled workforce or risk a construction crisis, professional bodies warn Government Brexit Minister, David Davis has been warned that the UK’s construction skills crisis could severely worsen, if the Government does not take steps to ensure access to a skilled workforce during its post-referendum negotiations.

The warning comes from a coalition of professional bodies representing the construction and built environment sectors. The Royal Institution of Chartered Surveyors (RICS), the Royal Institute of British Architects (RIBA), the Chartered Institute of Building (CIOB) and the Royal Town Planning Institute (RTPI) have written to the Secretary of State for Exiting the European Union, outlining their concerns around skills, as well as five other priorities that the UK Government should focus on in light of the UK’s Brexit vote.

The six priorities are:

Access to skills

The greatest strength of our sector is the skill of our workforce. The free movement of labour within the EU has been vital to the growth and flexibility)of the construction sector. Access to a skilled workforce of the highest quality and a focus on developing the next generation of home-grown talent are critical to ensure we can build the homes businesses and infrastructure we need to compete globally. We therefore urge the Government to explore options and approaches to ensure that this access is not impeded to the detriment of the built environment.

Common standards

We believe that the UK has much to gain from pursuing an approach that makes it easier to do business with trading partners new and old. Access to markets in the EU and around the world has transformed the UK construction sector. The mutual recognition of qualifications and the development of common technical standards have reduced the barriers our members face working abroad. Reducing tariffs and harmonising standards have helped UK firms of all sizes expand to Europe and beyond. These common approaches have also meant that UK businesses can support best-practice in environmental and product standards, supporting efforts on global issues such as climate change. It is imperative that governments in the UK protect and promote the UK’s role as a leader in environmental and consumer protection standards.

Research excellence

Our members have benefitted from the collaborative research that the EU has enabled and promoted. Our future success depends on maintaining these relationships, while forging new ties with research organisations around the world. In addition the continued success of our world class university courses training our young people in the built environment is essential to the underpinning of research and the continued supply of labour for construction and allied activities.

Infrastructure investment

The UK’s global competitiveness will be hampered unless we do more to tackle the major infrastructure challenges we face. With a housing crisis, and growing concerns around energy, telecoms, road, rail and airport capacity, the Governments in the UK must seek and entice prospective investors to consider infrastructure of all kinds. Providing confidence to the construction industry through infrastructure funding and development will provide stability during a period of uncertainty and ensure that the UK is well-placed to take advantage of growth opportunities in the future.

Devolution commitment

The referendum has brought divide between the different parts of the UK into sharp focus. Our organisations welcome the recent commitment to continuing the Northern Powerhouse and we believe that further devolution from Whitehall should be a key priority for the UK government as powers move from the European Commission. Devolution will enable a rebalancing of the economy so that all parts of the UK can benefit from any new opportunities arising from the UK’s new relationship with the European Union, and is an effective way of ensuring infrastructure spending is efficient, timely, coordinated and accountable.

Community development

Through the extensive skills and experience of our members we are best-placed to advise on how the built environment can unlock new opportunities and combat existing challenges, as well as provide places for people to live, work and play. Leaving the EU could present a great opportunity for the UK, but it should not be associated with a drive to the bottom in the environmental and building standards which future generations will live with.

RICS President, Amanda Clack FRICS, said “Recent RICS figures have shown that we are in the grip of our worst construction skills crisis in almost 20 years. There is a real concern within our industry that if access to a skilled workforce is further restricted, Britain could stop building. My colleagues and I would urge Government to keep this at the front of their minds when they come to negotiate our withdrawal from the EU.

“We know that infrastructure and construction investment is key to Britain’s economic growth. The uncertainty that immediately followed the referendum outcome led to decline in economic growth, increased market volatility and a reduction in UK infrastructure investment.

“While the initial post-Brexit slump appears to have stabilised, it is important that the Government focuses on maintaining infrastructure and construction investment leading up to and after Brexit, ensuring the right conditions are in place to attract infrastructure investors in all sectors across the UK.

“As we approach an unprecedented period of uncertainty, it is fundamental the government prioritises infrastructure and it remains at the forefront of maintaining a strong economy.”

RIBA President Jane Duncan commented “UK architecture, surveying, town planning and construction are flexible and innovative professions. I’m confident our members can help deliver strong economic growth in the UK, providing the buildings and infrastructure that meet the needs of our communities.

“With the right actions taken from the Government to address our industries joint priorities, we can tackle the challenges and exploit the opportunities that Brexit will bring. But unless we fix the housing crisis and address the economic imbalances in our economy, the UK won’t be in a position to compete internationally.”

Stephen Wilkinson, Vice President of the Royal Town Planning Institute, concluded “The UK is a world leader in environmental and building standards and in the professions which are involved in them. UK’s town planning expertise and university courses are among the most sought after in the world. Leaving the EU could present a great opportunity for the UK, but it should not be associated with a drive to the bottom in the environmental and building standards which future generations will live with.”

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Construction workloads continue to grow slowly, post-referendum

The pace of increase in workloads in the construction market continues to slow, according to the latest RICS UK Construction Market Survey, extending a trend that goes back to the middle of last year.

This flatter picture is visible across all sectors; 17% more respondents reported a rise in activity over the previous three months compared with 28% in the first quarter, with the most pronounced slowdowns being seen in the private commercial, industrial and housing segments. That said, 27% more contributors still reported a rise in private housing activity – down from 36% in Q1 – while 17% more respondents saw their workloads in the private commercial sector rise rather than fall in Q2.

Significantly, for the second successive quarter, the biggest constraint on output according to respondents is finance with more than two-third of contributors highlighting this as the principal challenge. In breaking down the term financial constraints, 36% of respondents reported that a lack of funding was restricting new developments. Meanwhile, planning and regulatory delays also remain a key issue with 60% of respondents citing that these are constraining growth.

Despite the slowdown in activity in Q2, skills shortages remain a problem with 56% of contributors reporting that a lack of appropriately skilled labour was a constraint on growth. Bricklayers and quantity surveyors remain in particularly short supply with 59% and 57% of respondents citing difficulties in these areas.

The more uncertain prospects for the economy have led to a less optimistic outlook for the sector over the year ahead. Although, putting this in perspective, 23% more contributors still expect activity to rise rather than fall over this period. On average, contributors foresee their workloads increasing by 1% over the coming 12 months, down from the 2.8% growth predicted in Q1.
Expectations for employment growth have also moderated significantly with a rise of 0.6% anticipated, down from 2% the previous quarter.

Aside from in Scotland where activity flatlined relative to Q1, respondents in all other parts of the UK continue to report a rise in workloads.

Simon Rubinsohn, RICS Chief Economist, commented “The latest results from the RICS Construction Market Survey suggest that the second quarter of the year saw a further moderation in the growth trend which is not altogether surprising given the build-up to the EU referendum. Significantly, the biggest issue at the present time alongside uncertainty looks to be credit constraints with over two thirds of contributors highlighting this issue as a concern.

“Encouragingly, the swift actions of the Bank of England in creating additional capacity for the banking sector to provide funding to meet demand should help alleviate some of this pressure. Nevertheless, anecdotal evidence does indicate that the challenge for the British government in establishing a new relationship with the EU could see some investment plans in the construction sector scaled back.”

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