RICS Construction Monitor Q1 2023, Scotland
ACTIVITY in the Scottish construction sector continued to fall at the start of this year as a challenging economic environment continued to impact the industry according to the latest Royal Institution of Chartered Surveyors (RICS) Construction Monitor. However, surveyors’ now expect growth in the 12 months head for the first time in almost a year.
A net balance of -6% of Scottish respondents said that workloads fell, the second consecutive quarter that this indicator was in negative territory. This is compared to the net balance +3% of respondents at the UK level. But on a 12-month horizon, Scottish surveyors now expect growth, with a +12% saying that workloads will be higher in a year’s time. The last time this indicator was in positive territory was Q2 2022.
Looking at the current workloads, private housing experienced the steepest slowdown of the sub-sectors, with a net balance of -21% of respondents reported. Most other sub-sectors were said to have had broadly flat workloads other than infrastructure. A net balance of +14% of respondents said that infrastructure workloads increased in the quarter.
With the expected rise in workloads, respondents in Scotland also expect employment to increase with a net balance of +26% expecting employment levels to be higher in a year’s time. In line with this relatively robust employment picture, skills shortages don’t appear to have eased. Shortages of quantity surveyors bricklayers and other construction professionals continue to be reported.
In Q1, 63% of surveyors reported a shortage of quantity surveyors, up from 58% in Q4 2022. Shortages in other construction professionals rose from 54% in Q4 to 61% in Q1. 51% of respondents continue to report shortages of bricklayers.
Although there are continued labour and material cost pressures, respondents in Scotland seem less concerned about the outlook for profit margins than they were. Whilst the net balance for profit margins was -40% in Q4 2022, this has eased to -1% in Q1 2023.
Commenting in the report on skills shortages, Andrew Outram from Pacific Partners LLP in Glasgow and Edinburgh said: “More training and encouragement to join the industry for school leavers should be prioritised.”
John Keillor of Currie & Brown in Edinburgh said: “The skills shortage across all parts of the industry will increase as more hit retirement age”.
Ian Simpson from Dc Thomson & Co Ltd in Dundee said that uncertainty over public policy and the future of government support for energy infrastructure was a concern.
Darren McCann, CCG (Scotland) Ltd in Glasgow commented: “Financial constraints and technical challenges around decarbonisation of existing assets.”
Commenting at UK level Simon Rubinsohn, Chief Economist, RICS, said: “The negative mood around development has eased somewhat in recent months with the workload trend stabilising away from infrastructure where the trend remains more positive. A key challenge for the sector continues to revolve around labour shortages in general and skills in particular. Unless addressed, this could prove to be a significant drag on the ambitions of the construction industry.
“Unsurprisingly, credit conditions remain restrictive for now but there is a sense that they could ease as the year wears on. Whether this improvement materialises remains to be seen in the face of the ongoing banking stress in the US and how this plays out around the globe.”
