Rising workload and a tightening labour market are set to push up construction costs, says the RICS' latest market report.

The RICS' third-quarter survey says activity will increase strongly during the next 12 months and that this, combined with the strength of the labour market, will "feed through to construction costs and produce higher levels of tender price inflation".

The report warns that skills shortages are looming. Some 42% of chartered surveyors reported a shortage of skilled labour across various disciplines in the third quarter, compared with 33% in the second quarter and only 19% in the first. The report says the rise is most marked for bricklayers.

Workloads in the North, Wales and South-west are being boosted by private commercial and industrial activity, reports the survey.

Northern Ireland is an improving market, too, but the report says the Midlands and East Anglia markets are weakening.

Private commercial work is leading the growth in work, with the industrial sector performing well in the past three months. The RICS adds that strong service sector demand is leading to an increase in the number of warehouses.