Construction industry workloads slow due to Brexit uncertainty

Workload growth subdued amid concerns over Brexit and instability  

Workloads have slowed across most sectors of the construction industry in Scotland as Brexit and domestic political instability delay investment, according to the Q2 2017 UK RICS (Royal Institution of Chartered Surveyors) Construction and Infrastructure Market Survey.
Anecdotal evidence from respondents suggests that uncertainty regarding Brexit is weighing on investment decisions, along with the political turmoil generated by last month’s General Election result.
After a positive picture in the Q1 survey with growth in workloads accelerating at its strongest pace since the EU referendum, growth has moderated in Q2 2017, with private commercial and the public housing sectors seeing the most significant easing.
Hew Edgar, Policy Manager, RICS Scotland, said: “There can be no doubt that the uncertainty generated by Brexit and a General Election that delivered a minority government is having a real impact on the market, as investment decisions are delayed and growth in workloads is depressed.
“RICS has been clear that what is needed is a clear, evidence-based position from both the UK and Scottish governments on how Scotland’s relationship with the rest of the UK and the European Union will develop. This would go some way to offsetting the uncertainty being reported by professionals, giving the market confidence and reassurance during a time of unprecedented change and upheaval.
“The UK, and Scotland, must work hard to ensure access to a skilled international workforce, passporting of professional services and Scotland’s attractiveness to private investors are maintained and strengthened to ensure Scotland, and the UK as a whole, remains an attractive proposition to potential investors.
“One way to achieve this would be a refreshed infrastructure plan from the Scottish Government that recognises infrastructure investment must be continuous to attract talent, and entices this talent to remain. The consideration of future projects and programmes of the plan should take into account the economic returns of the investment – at either a regional or national level.”
Meanwhile, across the UK, the more uncertain outlook for the economy as a whole has led to a less optimistic outlook for the sector over the year ahead. However, 44% more contributors expect activity to rise rather than fall. This is down from 53% the previous quarter. Likewise, only 29% more contributors now expect to see employment rise rather than a fall, compared with an average of 32% over the four previous quarters.
Financial constraints are reported to be by far the most significant impediment to building activity, and with a net balance of 79% (from 70% in Q1) is the highest reading in four years. Economic uncertainty driven largely by Brexit and the subsequent election result were identified as the primary causes of the constraint.
Difficulties with access to bank finance and credit, along with cash flow and liquidity challenges, were the second and third most frequently cited reasons, respectively.
Despite the slowdown in growth, skills shortages persist, with 55% of contributors reporting them as a constraint on growth. After having eased in 2016, the intensification of labour shortages appears to be biting once more. The lack of quantity surveyors and bricklayers appears to be particularly acute, but the shortfall also extends to other construction professionals.
Jeffrey Matsu, Senior Economist, added: “Economic and political uncertainty appear to be weighing on sentiment, but all things considered, current conditions and year-ahead workload expectations are holding up rather well relative to the longer-term trend. Given the ongoing nature of Brexit negotiations, it remains to be seen what impact this will have on financial conditions or the availability of skilled labour to the industry.”
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