Construction activity in Wales slowed at the end of last year as the challenging economic climate becomes increasingly visible in the construction industry.
According to the Royal Institution of Chartered Surveyors (RICS) construction and infrastructure monitor for Q4 2022 in Wales, macro-economic events, skills shortages and financial constraints are having an increasing impact on the sector.
Responding to the RICS survey, chartered surveyors in Wales said they expect to see overall workloads fall during 2023. The net balance for overall workloads in Wales was +11% in Q4 2022 - down from +15% in Q3 and +37% at the beginning of 2022.
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However, the survey also revealed a mixed picture at a sub-sector level with infrastructure and public housing remaining more positive.
The private industrial sector was the biggest contributor to the slowdown where workloads slipped to -25%, compared to +9% in Q3.
In contrast, infrastructure workloads remained more upbeat at +18%, reflecting the longer-term nature of many of these projects. In regard to public housing activity, a net balance of +27% of respondents said that workloads increased in Q4.
In response to the industry's crucial challenges, chartered surveyors in Wales continued to point towards the shortage of labour and materials.
Though the number of respondents highlighting these challenges has declined, the proportion identifying financial constraints as an obstacle has now risen for four consecutive quarters to reach 65% - the highest level since Q4 2020.
Looking ahead, a net balance of -4% was reported for workload expectations, suggesting that chartered surveyors in Wales expect activity to be slightly lower in a year’s time.
Respondents also expect profit margins to continue to be squeezed. However, the outlook for employment is more resilient with a net balance of +9%.
Julian Price of Enkom Consulting in Pontypridd said: “The last 18 months have been the most volatile in my career, but there are signs of it now settling”.
Marcus Annandale of Faithful and Gould in Cardiff said that “slow decision making” on critical infrastructure programmes was hindering the market.
Simon Rubinsohn, Chief Economist at RICS, said: "While the more challenging macro environment is beginning to impact parts of the construction sector, it is noteworthy that the forward-looking metrics even in the area of private residential development remain relatively resilient for now with housing workloads only seen as likely to slow modestly over the next year.
"Meanwhile, a series of significant energy and transport projects are continuing to support infrastructure workloads. Significantly, the industry is continuing to grapple with the challenge around finding adequate supplies of skilled labour, both at a professional and trades level. Addressing this issue will be critical in enabling the sector to play a comprehensive role in supporting the economy as it emerges from the current downturn”.
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