Construction sector future looks rosier15th May 2012

Activity levels in the construction sector edged upwards in the first three months of 2012 according to the latest RICS Construction Market Survey. This result contrasts with the sharp fall in output suggested by the official data.

8% more chartered surveyors across the UK reported increases rather than decreases in workloads. This is a notable improvement of the negative reading seen towards the end of 2011 and reflects a marked contrast in performance between the private and public sectors. The former is now showing some signs of life with workloads in the commercial sector in particular picking-up. On the other hand, public sector construction activity remains depressed.

More significantly, predictions for future construction activity saw a marked improvement in the first quarter of the year. 21% more respondents expect workloads to rise over the coming 12 months, the most positive reading since the early part of 2008. This is, rather encouragingly, also being reflected in a modest improvement in expectations for employment in sector, even though profit margins are viewed as likely to remain under pressure.

Most parts of the country saw either a rise or a steadier trend in workloads over the quarter. Surveyors in London and the South East reported the highest rises in overall activity, while those in the North recorded the first positive reading since the final quarter of 2007. 

Perhaps unsurprisingly, overall input costs – such as raw materials and labour – continued to increase in the three months to March as a net balance of 29% more respondents reported rises in outlays. The most significant increases in costs were seen in materials while staffing costs remained flat.

Simon Rubinsohn, RICS Chief Economist, said: “The start of the year saw a cautious level of optimism develop across the UK construction industry. Workloads rose across the sector, albeit modestly, and this looks as though it could continue over the next 12 months. Promisingly, this could also result in an increase in the numbers of jobs created in the sector.

“There are of course still significant hurdles to overcome. Finance for development remains a problem as does macro economic uncertainty. On top of this, the public sector will continue to scale back its capital spending programme putting ever more pressure on the private sector and institutional investors to deliver.”