RICS: Weak economic outlook constrains Scottish construction sector optimism
Optimism in Scotland’s construction sector has weakened for the year ahead however workloads are holding firmer than other UK regions, according to a new survey.
Anecdotal evidence from Scottish respondents to the Q3 2019 RICS UK Construction and Infrastructure Market Survey suggests that Brexit and political uncertainty, combined with skills shortages and planning hold-ups, is impacting on confidence.
The survey points to a marked softening in expectations for workloads amongst surveyors over the next year. A net balance of +18% of Scottish respondents to the latest survey expects workloads to be higher in 12 months’ time, down from +47% last quarter.
Scottish surveyors are also downbeat in their expectations for profit margins with a net balance of -17% of respondents expecting profit margins to be squeezed in the 12 months ahead.
That said, whilst the outlook is weaker, Q3 was a relatively solid one for the sector in Scotland, with 19% more surveyors saying that overall workloads rose than said they fell. But whilst this was higher than in any other UK region, it was marginally lower than in Q2.
Breaking that down, workloads in the public housing moderated significantly, with +12% more surveyors pointing to rising workloads compared to +52% last quarter. Meanwhile, workloads in the private house building and private industrial sectors remained relatively healthy, according to the survey, whilst the infrastructure and other public works subsectors saw modest growth.
Skills shortages continue to be a concern for respondents in Scotland, with 42% of respondents saying that they are experiencing a shortage of quantity surveyors, and 54% saying that they are seeing a shortage of other construction professionals.
Chris Grant MRICS of Careys Civil Engineering in Edinburgh, said: “There is still a great deal of Brexit related uncertainty within the industry, which is resulting in projects being delayed or shelved. In addition, there is uncertainty on budget costs due to imported materials.”
Jamie Crawford MRICS, based in Dumbarton, said that growth is being impacted by a lack of experienced building standards surveyors currently within the industry and lack of students entering the area.
Jeffrey Matsu, RICS Chief Economist, added: “As the UK heads to its third general election in five years, the mood music across the sector is relatively downbeat. However, while the pace of construction activity has moderated since the referendum, order books remain full as surveyors work through a backlog of previous projects.
“The outlook has the potential to materially improve, depending on the amount of fiscal spending that is authorised by government in the next spending review. Such pump priming has disproportionately supported construction and infrastructure works in the past.”