A fall in house-building activity acted as a drag on the Welsh construction sector during the second quarter of the year but surveyors expect overall workloads to improve in the 12-months ahead.
This is according to the latest The Royal Institution of Chartered Surveyors (RICS) Construction Monitor.
Looking at Q2 workloads, a net balance of 4% of respondents in Wales said that workloads rose over the quarter. Whilst the figure remains in positive territory, it is the lowest it has been in over two years.
Looking at the subsectors, public housing and other public works both saw an increase (22% and 4% respectively) whilst private housing (-24%), private industrial (-8%), infrastructure (-4%) and private commercial (-13%) all saw a decline. In the case of private housing, this represented a further deterioration compared to Q1 and is the lowest the net balance has been in three years.
A net balance of 14% of Welsh respondents though expects overall workloads to rise over the next year, up slightly from Q1’s figure of 12% and largely in line with UK-wide expectations where 9% of surveyors anticipate an increase.
Despite this, profit margins in Wales are expected to be squeezed further over the next year. A net balance of -32% of respondents anticipates a fall in profit margins, down from -16% in Q1. This is likely to be a consequence of rising interest rates and material costs.
Skill shortages in Wales continue across the sector and are reported to be the biggest factor limiting activity. 61% of respondents reported a shortage in quantity surveyors, 56% reported a shortage in construction professionals and 68% reported a shortage in bricklayers.
Huw Thomas from Isle of Anglesey County Council in Llangefni commented:
“The increase in material and labour costs due to inflation and the lack of good quality labour are impacting on the market.”
Andrew Davies of Hurley & Davies in Swansea added:
“There are skills shortages across the board and little influence on carbon-reducing measures in our sector.”
Commenting on the UK picture, RICS Chief Economist, Simon Rubinsohn, said:
“Feedback to the Q2 survey shows the rising trend in base rates is leading to increased financial pressures in the construction industry. This is not anticipated to lessen any time soon and is also reflected in the cautious assessment regarding the outlook for profitability. However, there are some signs of an easing in the extent of skill shortages which is accompanying the flatter trend in activity. Infrastructure numbers remain solid, but the survey provides further evidence of the challenges in delivering residential developments at the current time.”
