The construction sector in Wales has reported a decline in workloads, according to the latest construction monitor from the Royal Institution of Chartered Surveyors (RICS). Workloads fell across most subsectors in the first quarter (Q1) of this year, with the outlook softening.
Key Findings
A net balance of minus 17% of survey respondents in Wales reported a fall in overall construction activity. This is the lowest this balance has been in two years and the third consecutive quarter in negative territory. All subsectors saw declines except public housing, which saw a marginal increase (a net balance of plus 5%). The weakest net balance was for the private commercial subsector at minus 36%.
Constraints and Challenges
Financial constraints were cited by 76% of respondents as a factor limiting activity, making it the second most reported obstacle after planning and regulation at 85%. This is the highest number of respondents citing financial constraints since 2019 and a significant increase since the last quarter of last year. Anecdotally, respondents pointed to planning issues relating to nutrient neutrality as a continuing challenge.
Outlook and Expectations
With the increase in challenges, expectations for the year ahead have lowered. The net balance for 12-month workload expectations was plus 5% in the latest report compared to plus 9% previously. Both 12-month expectations for employment and profit margins are now in negative territory. The net balance for profit margin expectations at minus 44% is now at its lowest since Q1 2020.
Industry Reactions
Survey respondent Jayne Rowland Evans of GKR Maintenance & Building Co in Caerphilly said: “There is a lack of tenders. Procurement requirements and SSIP (safety schemes in procurement) are ever-increasing and difficult for SMEs who do not have dedicated departments.”
Mark Evans of Ivor Russell Partnership in Swansea said: “The impact of nitrates on the planning system in Wales has brought the construction industry to a near stop. Natural Resources Wales and the Welsh Government need to resolve the issue urgently, as all sectors are having to make staff redundant with immediate effect.”
RICS chief economist Simon Rubinsohn said: “The impact of the war in the Middle East is clearly visible in the Q1 construction monitor. Rising material costs, a tougher credit environment and increased pressure on margins are already leading some developers to slow construction activity. More significantly, plans for the next 12 months are being scaled back most notably in the private sector. Expectations around housebuilding are now flat which aligns with the comments from leading housebuilders in their recent trading updates and results statements.”
