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Welsh Construction Sector Showing Signs of a Slowdown

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Workloads in the Welsh construction sector continued to grow solidly, but momentum appears to be slowing as issues with skills, costs and credit conditions weigh on firms. That’s according to the RICS Construction & Infrastructure Monitor for Q2 2022.

Looking at the all-sector level, a net balance of +28% of respondents reported a rise in workloads in Q2, down from +40% in Q1. Whilst all sub-sectors were reported to still be experiencing solid growth, there was a slowdown across the board relative to Q1.

With the relative strength in current workloads though, the impact of labour shortages is being felt across much of the industry. 64% of respondents said that they were experiencing shortages of quantity surveyors, 66% reported a shortage in other construction professionals and 62% said there is a shortage in bricklayers.

Whilst 12-month expectations for workloads remain positive, albeit less so than before (a net balance of +24% of respondents compared to +36% previously), profit margins are projected by respondents to be dented as material and labour costs continue to rise. The profit margin outlook indicator was in negative territory in Q2 with a reading of -23%.

John Allen from AECOM in Cardiff said that issues with labour shortages and cost increases were being felt as demand had been too great for supply, which had pushed up costs and extended programmes of work.

Additionally, both Gerwyn Bowden from ChandlerKBS in Cardiff and Neil Taylor from RHA Wales in Rhondda Valleys noted the labour shortages that the market is facing and the impact on the sector.

RICS Chief Economist, Simon Rubinsohn, commented:

“Feedback from RICS members suggests construction activity remains firm and that it is likely to continue to grow solidly over the coming year despite broader macro challenges, partly as a result of ongoing work on a series of big infrastructure projects.  However increasing concerns are beginning to be expressed about the deterioration in credit conditions particularly for smaller businesses in the sector which is also now visible in the worsening insolvency data. Despite this, the sector continues to grapple with challenges around recruitment with respondent to the survey indicating they were facing labour shortages. And unsurprisingly, it is in the area of skilled trades where this shortfall is most intense.”