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North East construction sector shrugging off Brexit concerns, finds RICS study

Expectations across the construction sector in the North East have now regained the ground lost post the EU vote, according to the latest Royal Institution of Chartered Surveyors (RICS) Construction Market Survey.

Following a noticeable dip around the time of the EU referendum, expectations for output growth in the region’s construction sector over the year to come have strengthened, with 71% more North East chartered surveyors expecting workloads to increase over the coming 12 months.

Alongside this, employment expectations improved during the last quarter of 2016 (Q4 2016), with 47% more respondents anticipating a rise in construction sector employment over the year to come.

The latest results point to modest growth across the sector in the final quarter of 2016, with 41% more respondents reporting an increase in workloads. However, while the data is broadly positive, the anecdotal comments left by North East chartered surveyors in – in the construction sector - do continue to highlight uncertainty surrounding the departure from the EU to be dampening investment and activity.

During Q4, output levels remained the same or increased slightly across most sub sectors in the North East except private industrial and private housing. The strongest quarterly rise in workloads was reported in the region’s infrastructure sector with 30% of respondents reporting a rise in activity (up from 25% in the previous quarter).

Over the next twelve months, 25% of the North East’s construction chartered surveyors expect the road and rail sub categories of infrastructure to post the most significant increases in construction output.

Peter Carruthers of Summers- Inman in Newcastle upon Tyne said: “Against an uncertain national background, the North East market currently remains strong with new starts and future pipeline work.”

Skills shortages continue to be a key impediment to growth in the region’s construction sector, with 50% of respondents reporting a shortage of labour (up from 46% in Q3). Interestingly, the survey highlighted a significant shortage of quantity surveyors with 69% of respondents highlighting a gap. Other roles that respondents reported as having a lack of skilled workers include bricklayers (36%) and plumbers (37%) whilst 45% highlighted a lack of both plasterers and carpenters.

Other areas reported as holding the sector back and limiting activity include planning and regulation issues with 69% of the North East’s construction chartered surveyors highlighting this as a problem. But by far the biggest hurdle most construction projects face is financial constraints, with 88% of respondents citing this as an obstacle.

Geoff White, Policy Manager at RICS North & Midlands, said: “Many firms are currently having to bring construction professionals in from outside the UK. The lack of quantity surveyors consistently apparent in our survey is also underscored by the fact that, at the moment, under the government’s Shortage Occupation List, it is easier to employ a ballet dancer than a quantity surveyor.

“Even if we were to reverse this and also ensure that through Brexit we maintain access to EU workforce, we would still have a domestic shortfall of skills. The Industrial Strategy is a golden opportunity to align education, training and employer work paths – along with modern methods of construction – to ensure we have the skilled workforce to meet our building targets.”

Simon Rubinsohn, RICS Chief Economist, adds: “The latest results suggest that the construction sector has shrugged off concerns about the effect of Brexit with key workload indicators remaining firm around the country. Indeed, feedback regarding the outlook over the next twelve months is now rosier than it was back in the autumn with more building anticipated as 2017 unfolds.

“That said, there remains some unease about access to skilled labour in the emerging new world and financial constraints still remain a major challenge for many businesses. And significantly, we are being told that a shortage of quantity surveyors is impacting on the development process at the present time.”

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