RICS: 'Construction work in region is being held up by financial strains'

According to results by RICS (UK Construction Market Survey), construction workloads in the region slowed during Q2 of the year amid financial constraints - noted as a significant impediment to building activity.

In Q2, 21 per cent more chartered surveyors in the region said their workloads had risen rather than fallen - down from 25 per cent in the first quarter of the year (Q1), whilst 80 per cent of respondents noted that financial constraints were the most limiting factor to building activity.

Respondents have cited financial constraints to be causing difficulties in recent reports, and more specifically access to bank finance and credit, cash flow and liquidity challenges or less favourable cyclical market conditions.

However, alongside financial constraints, planning delays and restrictive regulations were also cited as continuing to limit activity.

Mark Humphreys MRICS of Laing O’Rourke Construction, said: “The squeeze on main contractors and unsustainable margins over recent years is resulting in a high-risk environment and numerous liquidations and cash poor contractors.

“This is also possibly the Brexit effect which is an unknown.”

Looking at construction workloads across the property sectors during Q2, private commercial saw the sharpest reduction, with 12 per cent of respondents seeing a rise in working on private commercial schemes (down from 21 per cent in Q1).

Workloads on infrastructure schemes in the region supposedly also failed to pick-up in Q2, with 16 per cent of respondents reporting an increase in working on infrastructure projects (down from 24 per cent in Q1), whilst just eight per cent of contributors saw a rise in workloads for industrial developments (down from 11 per cent in Q1).

But moving to workload expectations over the next 12-months, 44 per cent of respondents in the North East are confident construction workloads will increase, with rail and road projects expected to post the strongest growth over the next year.

Jeffrey Matsu, RICS’ senior economist, added: “Although growth in the sector has moderated, ongoing capacity constraints have ensured a steady pipeline of work with robust expectations for the year ahead.

“With businesses continuing to hire to meet this pent-up demand, the effects of any uncertainty generated by Brexit or recent market events, including Carillion, may only become more evident in the longer-term.”