How worried should we be about the the findings by the surveyors body RICS in its latest construction market survey showing that the outlook for the industry is at its worst for a decade?
The short answer is seriously concerned. But that is only a partial answer. It certainly does not address the fact that what seems like only yesterday there were plenty of experts predicting all manner of problems, with the industry by now in near meltdown swamped with work and bereft of talent.
The most fanciful of those predictions now look as they did at the time – fanciful. But they do provide object lessons in the need to contain hyperbole. And there is a real danger that too much might be read into the RICS survey.
To understand what the RICS survey means let’s start by putting it in context. Here it is worth making some points mainly about who is being surveyed and the influence this has on the figures.
RICS members working in construction will tend to be skewed to work at the front end of the business. This isn’t a problem, if anything it is a virtue as it makes the survey more of a lead indicator of what might happen in construction and so is very useful for that.
Also there is a likelihood that the pool of respondents will tend over represent the new work sectors and building sectors (especially commercial work).
Again this is no criticism of the survey, but it is fair to say that a huge amount of work carried out in people’s homes will be underrepresented.
The likelihood too is that this survey is more sensitive to early swings in sentiment than many others. Many RICS members work in consultancies and a proportion of their work will be what might be described as speculative or long-term. So, when there is nervousness this flow of work will be shut down rapidly, as, when there is exuberance in the market, there will be a surge in developers and the rest working up potential plans. So the survey may be exaggerating the likely swing in work on the ground.
This is no fault. Again it is a good thing to have such a survey within the armoury of construction information.
But it could be assumed from reading some headlines in the nationals that the survey points to an impending recession, or suggests that we are there already. That is not the case as the latest construction output figures show. And a quick scan through the comments from respondents at the end of the report confirms that the industry – leaving aside house building – is by and large still bubbling along reasonably nicely.
So why should we be seriously concerned by the survey? Simple, it is a very good indicator of potential trouble ahead. And it offers some time for businesses to readjust to avoid the worst of what might, just possibly, befall the construction industry.