Despite strong workloads expansion of the Welsh construction sector is slowing as skills, costs and credit conditions weigh on firms, shows new research.
According to the RICS Construction & Infrastructure Monitor for the a net balance of plus 28% of construction firms reported a rise in workloads in Q2 of this year, down from plus 40% in Q1.
Whilst all sub-sectors were reported to still be experiencing solid growth, there was a slowdown across the board relative to Q1.
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With the relative strength in current workloads though, the impact of labour shortages is being felt across much of the industry. 64% of respondents said that they were experiencing shortages of quantity surveyors, 66% reported a shortage in other construction professionals and 62% said there is a shortage in bricklayers.
Whilst 12-month expectations for workloads remain positive, albeit less so than before (a net balance of plus 24% of respondents compared to plus 36% previously), profit margins are projected by respondents to be dented as material and labour costs continue to rise. The profit margin outlook indicator was in negative territory in Q2 with a reading of minus 23%.
RICS chief economist, Simon Rubinsohn, said: “Feedback from RICS members suggests construction activity remains firm and that it is likely to continue to grow solidly over the coming year despite broader macro challenges, partly as a result of ongoing work on a series of big infrastructure projects. However, increasing concerns are beginning to be expressed about the deterioration in credit conditions particularly for smaller businesses in the sector which is also now visible in the worsening insolvency data.
"Despite this, the sector continues to grapple with challenges around recruitment with respondent to the survey indicating they were facing labour shortages. And unsurprisingly, it is in the area of skilled trades where this shortfall is most intense.”
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