SCOTTISH construction market activity fell for the fourth consecutive quarter with all subsectors now seeing either flat or falling workloads according to the latest Royal Institution of Chartered Surveyors (RICS) Construction Monitor.
A net balance of -21% of Scottish respondents said that workloads fell in Q3, down from -4% in Q2,.This brings the workload balance to its lowest level in over three years and its lowest, outside of lockdowns since Q2 2012.
Looking at the subsectors, a net balance of -23% of respondents experienced a decline in public housing workloads, -33% in private housing, -16% in private commercial, -31% in private industrials and -7% in other public works. The only subsector that didn’t experience a fall was infrastructure in which workloads were noted to be flat.
Although surveyors in Scotland are continuing to report labour shortages, the shortages noted in Q3 appear to be less severe than in Q2. 56% of Scottish surveyors reported a shortage in quantity surveyors, down from 63% in Q1, 54% noted a fall in other construction professionals compared to 61% in Q1 and 47% reported a shortage in bricklayers which is the lowest this figure has been since the beginning of 2021.
Looking ahead, surveyors in Scotland expect workloads to be relatively flat over the next 12 months. A net balance of -3% expect a decline. Surveyors in Scotland are less optimistic than respondents in the rest of the UK though, where a net balance of 6% expect a rise in workloads over the next year on average.
According to the latest survey, respondents in Scotland indicate that profit margins will continue to be squeezed over the next year. A net balance of -17% of respondents expect profit margins to fall, compared to -15% that expected a fall in Q2, and -1% in Q1.
David Shaw of Torridon Cost Consultancy in Edinburgh said: “Pricing volatility has improved in the last quarter, giving clients more confidence to invest in their projects. However, this is still balanced with financing challenges. The availability of QS professionals in the market, particularly at senior and associate levels, remains a challenge.”
Lorna White of Rjt Excavations Ltd in Edinburgh commented: “Budget constraints are impacting massively due to costs increasing over the past three years.”
Lesley Brown of Jacobs in Glasgow said that a lack of government-funded projects was impacting the market significantly.
Liam Spence of Ditt Construction Ltd in Shetland said: “There is currently a major shortage of labour.”
Commenting on the UK picture, 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.”