Welsh construction sector has reported a fall in workloads

The RICS has released its latest construction monitor

The construction sector in Wales has reported a decline in workloads. According to the latest construction monitor from the Royal Institution of Chartered Surveyors (RICS) workloads declined across most subsectors in the first quarter (Q1) of this year with the outlook softening.

A net balance of minus 17% of survey respondents in Wales reported a fall in overall construction activity, which is the lowest this balance has been in two years, and the third consecutive quarter this balance has been in negative territory.

All subsectors saw declines in activity according to the balance of respondents other than public housing which saw a marginal increase (a net balance of plus 5%). The weakest net balance was for the private commercial subsector with a net balance of minus 36% of respondents.

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Financial constraints were cited by 76% of respondents in Wales as a factor limiting activity, making it the second most reported obstacle, after planning and regulation at 85%. This is the highest number of respondents citing financial constraints since 2019 and a significant increase since the last quarter of last year. Anecdotally, respondents pointed to planning issues relating to nutrient neutrality as a continuing challenge.

With the increase in challenges facing the construction market, expectations for the year ahead have lowered. The net balance for 12-month workload expectations was plus 5% in the latest report compared to plus 9% the last time. And 12-month expectations for both employment and profit margins are now in negative territory. In the net balance for profit margin expectations at minus 44% is now at its lowest since the first quarter of 2020.

Survey respondent Jayne Rowland Evans of GKR Maintenance & Building Co in Caerphilly, said: “There is a lack of tenders. Procurement requirements and SSIP (safety schemes in procurement) are ever-increasing and difficult for SMEs who do not have dedicated departments.”

Mark Evans of Ivor Russell Partnership in Swansea said: “The impact of nitrates on the planning system in Wales has brought the construction industry to a near stop. Natural Resources Wales and the Welsh Government need to resolve the issue urgently, as all sectors are having to make staff redundant with immediate effect.”

RICS chief economist, Simon Rubinsohn, said: “The impact of the war in the Middle East is clearly visible in the Q1 construction monitor. Rising material costs, a tougher credit environment and increased pressure on margins are already leading some developers to slow construction activity. More significantly, plans for the next 12 months are being scaled back most notably in the private sector. Expectations around housebuilding are now flat which aligns with the comments from leading housebuilders in their recent trading updates and results statements.”