Private Sector Leads Construction Market Upturn

 

  • Rising workloads in the private commercial and housing sectors led to an overall improvement in the construction market, despite public sector activity continuing to fall during the first three months of 2011.
 
  • Overall workloads improved during the last quarter, moving to a net balance of +6 from -5. However, this was largely boosted by the dramatic rise in activity seen by the private sector, with 17 per cent more surveyors reporting workloads in commercial construction rose rather than fell. The private housing sector also saw a welcome hike in activity, moving to a net balance of +8 (from -10). In contrast, however, public housing and public non-housing sectors continued to be the hardest hit, with net balances in both sectors remaining in negative territory.
 
  • The overall rise in workloads also masked stark regional differences, with work levels varying significantly across the UK. A North/South divide was apparent, with respondents in the South reporting increased activity and workloads seemingly dipping in the North. London and the South East reported the strongest figures, with a net balance of +24, whereas Northern Ireland recorded the largest falls in activity with a reading of -68.
 
  • Elsewhere, material costs continue to rise, with 62 per cent more surveyors reporting a hike in prices, up from 56 per cent during the previous three months. However, the cost of hiring tradespeople and professionals continued to slip, reflecting increased competition for jobs, which is driving down the cost of labour.
 
  • Looking ahead, surveyors revealed that the market remains competitive but are positive about future job prospects, for the first time since Q1 2008, with 5 per cent more respondents expecting employment levels to rise rather than fall over the next 12 months. Surveyors were similarly upbeat with predictions for workloads, at a net balance at +18, the best reading in three years. Nevertheless, perhaps unsurprisingly, estimated profit margins remain negative, with 30 per cent more expecting profits to fall rather than rise over the coming year.
 

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Commenting, RICS Chief Economist, Simon Rubinsohn said:
 
“The stronger reading for construction output workloads in the first quarter of 2011 compared with the final three months of 2010 contrast directly with recent ONS data - strengthening the case for an investigation into the quality of the official statistics. We are particularly encouraged by the indications that the private sector is not only seeing an increase in workloads but planning to raise employment.
 
“With impending public spending cuts, the construction industry is still likely to face significant challenges over the next twelve to eighteen months, but our latest results do provide a chink of light that things are beginning to get better.”
 

     
   
 
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