Political uncertainty ‘still hampering Scottish construction market’

Results of the latest Construction Market Survey, published by the Royal Institution of Chartered Surveyors (RICS), revealed that Brexit and referendum uncertainty is continuing to cause concern, though the outlook for Scotland is expected to improve slightly, with rise in workloads over the coming year.

According to the survey, a net balance of 3 per cent more chartered surveyors reported that construction workloads in the UK had risen, rather than fallen this quarter, although slightly stronger than the balance of -2 per cent posted last quarter, it is a significant slowdown on the trend growth over the previous three years.

Private housing saw the fastest rate of growth compared to other construction sectors, with 15 per cent more chartered surveyors reporting workloads had risen rather than fallen. Both the private commercial and infrastructure sectors in Scotland saw a drop in construction activity during Q3.

In the Scottish private industrials sector, 9 per cent more contributors reported a rise rather than a fall in workloads, meanwhile, activity in the public housing sector remained flat.

Looking further ahead, respondents predict generally subdued growth for the Scottish construction sector over the year to come, with 7 per cent more respondents forecasting a rise in workloads rather than a fall. On average, contributors expect activity to rise by 2.5 per cent over the next twelve months across the UK as a whole.

Despite the slowdown in activity, expectations for employment growth in Scotland have improved with 21 per cent more respondents forecasting a rise rather than a fall, up from 11 per cent in Q2.

However, both workload and employment expectations are still lower than pre-Q2 levels and anecdotal evidence from respondents suggests that uncertainty relating of the UK’s future relationship with Europe is still causing them concern regarding their future workloads.

In Q3, financial constraints remain the most significant impediment to growth throughout the UK, anecdotally linked to uncertainty, with 69 per cent of contributors reporting such constraints to be holding back growth. Planning and regulatory delays are the next most substantial factor with 55 per cent of respondents citing problems in this area.

A more buoyant view of the sector was portrayed by the Federation of Master Builders (FMB) Scotland yesterday as it found that small to medium-sized firms (SMEs) in the Scottish construction sector have reported growth in the three months following the UK’s decision to leave the EU, albeit at a slower rate than in the preceding three month period.

Simon Rubinsohn, RICS chief economist, said: “The picture painted by the Q3 survey is one of subdued growth, and although expectations have improved following the immediate shock of the vote to leave the EU, anecdotal evidence from respondents suggests that much uncertainty still remains on the outlook for the year ahead.”