RICS warns of a retail slowdown but wider market remains steady

The construction industry should steel itself for a slump in the retail market, an RICS economist has said. The warning comes as further evidence has emerged that the construction economy is broadly bouncing back.

Ryan Emmett, economist at the RICS, said that despite positive signs in other sectors, “after the large explosion in shop building, now the retail market is going through the floor. This is going to have a significant impact on the construction industry.”

The RICS’ latest survey of QSs found that the industry picked up in the third quarter of 2005 overall and remains above the long run average.

Construction orders went up 12% over the past six months in the largest increase seen since mid 2004.

Emmett said activity was showing renewed strength after a slowdown that had turned out to be short-lived towards the end of 2004.

The QSs reported that private housing was the most positive sector. The sector is expanding at the fastest rate for 15 months, due to increasing signs of a modest recovery in housing demand, the RICS said. Construction orders were particularly strong in the housing sector, both private and public.

But Emmett said construction orders should “always be taken with a pinch of salt” as they were an imperfect measure of the industry’s condition. He said that orders did not always translate into output. He added: “Construction jumps around so much, it could be only that projects are being recorded all at once rather than there being a real increase.”

In other sectors, private commercial market work continued to grow, but slower than in 2004, reflecting a drop in business demand for property.

Skills shortages in construction were found to be stable in the third quarter of this year in contrast to the sustained declines witnessed since the start of 2004. The RICS said this could indicate stabilisation in construction labour demand and support from workers from Eastern Europe.