Activity in the Scottish construction sector continued to fall at the start of this year, as a challenging economic environment continued to impact the industry.
The latest Royal Institution of Chartered Surveyors (RICS) Construction Monitor also revealed that surveyors’ now expect growth in the 12 months ahead for the first time in almost a year.
A net balance of -6% of Scottish respondents said that workloads fell; the second consecutive quarter that this indicator was in negative territory.
This is compared to the net balance +3% of respondents at the UK level.
But on a 12-month horizon, Scottish surveyors now expect growth, with a +12% saying that workloads will be higher in a year’s time.
Looking at the current workloads, private housing experienced the steepest slowdown of the sub-sectors, with a net balance of -21% of respondents reported.
Most other sub-sectors were said to have had broadly flat workloads, other than infrastructure. A net balance of +14% of respondents said that infrastructure workloads increased in the quarter.
With the expected rise in workloads, respondents in Scotland also expect employment to increase, with a net balance of +26% expecting employment levels to be higher in a year’s time.
In line with this relatively robust employment picture, skills shortages don’t appear to have eased, with shortages of quantity surveyors bricklayers and other construction professionals continuing to be reported.
In the first quarter, 63% of surveyors reported a shortage of quantity surveyors, up from 58% in the fourth quarter of 2022. Shortages in other construction professionals rose from 54% in the fourth quarter to 61% in the first.
Although there are continued labour and material cost pressures, respondents in Scotland seem less concerned about the outlook for profit margins than they were. While the net balance for profit margins was -40% in the last quarter of 2022, this eased to -1% in the first three months of 2023.
Andrew Outram, a consultant at Pacific Partners, said: “More training and encouragement to join the industry for school leavers should be prioritised.”
John Keillor, associate director at Currie & Brown in Edinburgh, said: “The skills shortage across all parts of the industry will increase as more hit retirement age.”
Ian Simpson, interim head of estates at DC Thomson & Co in Dundee added that uncertainty over public policy and the future of government support for energy infrastructure was a concern.
Simon Rubinsohn, chief economist at RICS, commented: “The negative mood around development has eased somewhat in recent months with the workload trend stabilising away from infrastructure where the trend remains more positive.
“A key challenge for the sector continues to revolve around labour shortages in general and skills in particular - unless addressed, this could prove to be a significant drag on the ambitions of the construction industry.
“Unsurprisingly, credit conditions remain restrictive for now but there is a sense that they could ease as the year wears on.
“Whether this improvement materialises remains to be seen in the face of the ongoing banking stress in the US and how this plays out around the globe.”
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