Construction sector defies Brexit uncertainly and picks up pace

construction

Yorkshire and Humber’s construction sector appears to be picking up pace despite ongoing Brexit related indecision, according to the RCIS.

The organisation’s  Q2 2019 Construction and Infrastructure Market Survey shows output growth accelerating, and workload and employment expectations gathering pace for the year ahead.

During the second quarter of the year 21% more respondents in the region’s construction sector reported an increase in construction workloads, up from 15% in Q1. Workloads on infrastructure projects grew the fastest in Q2 (22% of contributors reported a rise in activity, up from 10% in Q1) along with work on private commercial developments with 14% of respondents seeing an increase in commercial activity, up from just 2% in Q1.

Over 42% of the region’s construction professionals reported a rise in workloads on private housing during Q2 (up from 36% in Q1), whilst over 20% of respondents also saw an increase in work on public housing developments in Q2 (up from 19% in Q1). There was also a modest growth in activity for industrial projects with 3% of contributors reporting a rise in such activity in Q2 (up from 2% in Q1).

Looking to the year ahead, 40% of construction professionals in Yorkshire and Humber expect to see their workloads increase over the coming year. The infrastructure, energy, rail and communications subsectors are expected to see the strongest expansion in output over the coming twelve months. However, despite the potential of additional Government spending, nearly two-thirds of respondents were of the view that infrastructure projects will stall without access to funding from the European Investment Bank.

Over 21% of contributors anticipate taking on extra headcount over the next 12-months, but the on-going skills shortages are proving a constraint on employment and activity (46% of respondents highlighted a lack of quantity surveyors).

However, the biggest impediment to building activity in the region is still access to finance, according to close to 70% of the region’s construction professionals. More respondents reported a deterioration in credit conditions over the past three months too, yet year-ahead expectations have become somewhat less restrictive.

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 24% (from 23% in Q1). Investments related to equipment, software and worker training are expected to gather pace as well.

Barry Smith MRICS of M A Cost Consulting Ltd in Sheffield said: “Profit margins are being squeezed and costs are moving quickly, meaning some tenderers are worried about catching a cold by pricing too low. Nervousness from overseas investors regarding Brexit is affecting scheme progression and site purchases too.”