The Royal Institution of Chartered Surveyors (RICS) has released a new report indicating a slightly more optimistic outlook for the UK construction market.
- For the first time since early 2023, the index for construction workloads is no longer negative, showing signs of recovery.
- Infrastructure remains the most robust sector, with increased workloads recorded, and optimism about future trends is evident.
- Labour market conditions are improving slowly, although financial constraints and planning regulations persist as significant hurdles.
- RICS experts highlight the need for a comprehensive plan to enhance the planning system and address longstanding sector challenges.
The Royal Institution of Chartered Surveyors (RICS) recently published its UK Construction Monitor for the first quarter of 2024, revealing a promising shift in the workload index, which moved out of negative territory. For the first time since the first quarter of 2023, this index achieved a net balance reading of zero, a notable improvement from the -8 reading in the last quarter of 2023. This changing trajectory suggests the market might be embarking on a path to recovery.
The infrastructure sector stands out as the strongest performer within the construction industry. This subsector experienced a significant increase in workloads, with a net balance of 17% of respondents reporting a rise, up from 9% in the previous quarter. Expectations for the next 12 months have also improved, with a net balance of 24% of respondents anticipating a positive trend in construction activities, compared to just 12% in the previous quarter. Other sectors, such as private residential and commercial markets, are also showing signs of recovery, with anticipated growth in workloads over the coming year.
Employment projections within the sector appear favorable, with a net balance of 21% predicting an increase in headcounts, a marginal rise from the previous quarter’s 20%. Despite a challenging financial landscape, there is a glimmer of hope in credit conditions. The outlook indicator for credit conditions reached a positive net balance of 2% for the first time since its inclusion in surveys. The long-term outlook also showed improvement, climbing to 22% from 11%.
However, financial constraints continue to pose significant challenges, remaining the leading barrier to market activity for three consecutive quarters as cited by 63% of responses. Planning regulations follow closely as another major hurdle, with 55% indicating it as a significant obstruction to progress. Although concerns around labour shortages persist, they have stabilised, marking the lowest concern rate since the first quarter of 2021, with 44% of respondents identifying it as an issue.
Simon Rubinsohn, RICS’ chief economist, acknowledges this positive development, particularly within the residential segment, despite not reaching previous development figures or national targets. He notes that while credit conditions show signs of easing, financial and labour constraints still significantly impact the industry’s performance. Robert Toomey, a senior public affairs officer at RICS, advocates for systemic changes in planning and regulation to address essential sector needs. Toomey calls for a more streamlined, efficient approach, focusing on serviceable land allocation, enhanced planning system efficiency, and a reassessment of Green Belt policies.
The RICS report highlights a cautiously optimistic outlook for the UK construction sector, despite persistent financial and regulatory challenges.
