Construction bounces back in third quarter, RICS survey finds

UK construction activity bounced back in the third quarter of 2005, ending the modest slowdown seen in the previous two quarters, according to the latest RICS construction market survey.

But the regional picture was more mixed. Growth was positive in the third quarter in London, the South East, Scotland and Wales, but growth slowed in Northern Ireland and the South West.

Housing stood out as the fastest moving sector and it is now expanding at its quickest rate for 15 months.

Contractors can pick and choose work, which is driving Tender returns to levels that do not reflect value for money. Preliminaly costs continue to rise as a consequence of rising staff costs

Gary Lockey, Davis Langdon

Overall construction workloads increased during the quarter. Of the surveyors questioned, 17% more reported a rise in workloads than reported a decline. This was up 2% on the previous quarter, according to the RICS.

These signs of strength were echoed in the Chartered Institute of Purchasing and Supply’s (CIPS) figures for September. The Construction Purchasing Manager’s Index recorded 57.2 for the month, down only slightly from August’s 16-month high of 57.4.

Older properties are being converted into affordable apartments and in some areas old mills, chapels and warehouses overlooking rivers and canals are being converted into luxury apartments

Harry Livesey, H Livesey

The RICS said that private home building led the growth in the housing sector, based on stability in housing demand. The strongest rise in housing workloads was seen in London and the South East. Private commercial market work continues to grow steadily, but slower than in 2004, reflecting lower demand for commercial property.

The report said a government desire to save public money could be behind the slowdown in the growth of public housing and infrastructure works during the third quarter. But government spending is expected to rise sharply in the coming year, which should bolster such public projects.

Many more clients are now looking at long-term arrangements with their consultants and we are frequently making submissions for five year agreements

Robin Goddard, Brodie Plant Goddard

Looking ahead 12 months, surveyors were more confident than average. Again, this was backed up by the CIPS, whose Future Business Activity Index posted 75.8 in September, signalling a high level of confidence in UK construction firms over prospects for the coming year. Around 58% of companies anticipated a rise in activity. The RICS said this optimism reflected the hope of a revival in activity following the interest rate cut in August and the likely boost to London and South East-based firms from contracts for the 2012 Olympics.

Skills shortages held firm during the quarter after sustained declines seen since the middle of 2004. The RICS said this hinted at both stabilisation in construction labour demand and the impact of the recent surge of Eastern Europeans into the UK construction market.

A reduction in the number of primary estimates being prepared may lead to a downturn in overall workload for the construction market in general in the near future

David Allen, VB Evans & Co

Wales saw a huge rebound in the third quarter, ending a two quarter run in negative territory. Every sector in the country is now above its long-run average, according to the RICS, with surveyors upbeat regarding future workloads, employment and profits.

Scotland also saw above average growth in the third quarter, with private housing growing at three times its long-term average.

By contrast both Northern Ireland and the South West were in positive territory but worse off than the previous quarter. A slowdown in private housing was to blame in each region’s case.