RICS reports slowdown in construction workload due to Brexit

Construction workloads slowed modestly across all sectors as the uncertainty surrounding Brexit and the political turmoil following the last elections weighed on investment decisions, a leading business lobby said.

Profit margins were also said to be getting squeezed during the three months to June, possibly a result of rising cost pressures and with skills shortages said to remain as pronounced as in the prior quarter.

A net balance of +21% of respondents reported an increase in total workloads during the second quarter, down from +27% in the previous three months, the Royal Institution of Chartered Surveyors said.

RICS senior economist Jeffrey Matsu said: "Economic and political uncertainty appear to be weighing on sentiment, but all things considered, current conditions and year-ahead workload expectations are holding up rather well relative to the longer-term trend.

"Given the ongoing nature of Brexit negotiations, it remains to be seen what impact this will have on financial conditions or the availability of skilled labour to the industry."

Difficulties with access to bank finance and credit, along with cash flow and liquidity challenges were the second and third most frequently cited reasons, respectively, RICS said referencing results from its second quarter UK construction and infrastructure market survey.

Of those surveyed, +79% said financial impediments were the greatest hurdle to building activity, up from 71% over the prior three months, RICS said.

Expectations for tender prices also climbed, likely a reflection of cost pressures. On a related note, expectations for profit margins eased from +18% to +8%.

Growth was down across all sectors, but with the private commerical and industrial segments enduring the brunt of the slowdown. That stood in contrast to the results of the first quarter survey, which showed workdloads growing at their briskest pace since the referendum.

Within the private commercial subsector, 21% more survey participants reported an increase, down from 31% in the first quarter.

Similarly, 29% of contributors said private housing activity increased, in-line with the average reading in 2016 but down from 34% in the first quarter.

Infrastructure workloads on the other hand remained broadly unchanged with roads, rail and energy expected to see the strongest growth in output over the coming twelve months, albeit thanks to a surge in such spending in the Midlands and East Anglia.

All other parts of the UK reported a slowdown in infrastructure.