Slowdown may not last

Have times suddenly got tougher? Recent surveys certainly suggest the case. The last month has seen gloomier statistics on current conditions for construction than ever before, as well as doubt as to the volume of future workloads. Reports from the Construction Products Association (CPA) and the Chartered Institute of Purchasing and Supply have both seen a tailing off in work leading to a flat 2005 and 2006. Both this year and next will see a growth of less than 1%, reported the CPA late last month.

The latest construction market survey by the RICS is no different. The report for the second quarter of this year, released this week, saw a slowing in workloads for the second consecutive quarter, although the growth in activity is still above the long running average for the survey. Confidence amongst QSs across the UK for the next quarter was also half what it was from the first quarter, with only 28% expecting rises compared to 43% at the start of the year. Rising material prices and greater uncertainty over the economic outlook have dampened expectations,” the reports says. This has also led to a drop in expectations of profit margins amongst surveyed QSs, with the three-month outlook at its most cautious for nearly two years.

Is this just a short-term blip? The survey suggests as much and underlines the current feeling that the lion’s share of confidence in the construction economy clearly depends on continuing public spending. It reports QSs revising long-term expectations only marginally. “This suggests that surveyors do not envisage a persistent slowdown,” it adds. RICS economist Ryan Emmett also backs up the view that the latest gloom may not last. “We are not drawing too many conclusions.

It’s more of a pausing for breath at the moment,” he says.

One positive impact the tightening workload conditions are making is on labour. Skills shortages for construction trades dropped to their lowest level since early 1999. Emmett points to anecdotal evidence from QSs surveyed as to the impact of the influx of Eastern European workers since EU enlargement last year. “They are helping to ease shortages,” he says. This has led to a 4% drop in the amounts of QSs expecting employment to increase in the next quarter and a 14% drop in a rise in jobs over the next year. Big declines of shortages were reported for plasterers, bricklayers and plumbers, the latter two being the categories experiencing the worst labour availability.

But on the professional front, acute shortages continue to affect QS firms. “That’s definitely a big issue out there for the firms,” adds Emmett.