North East construction suffers from dip in workloads and labour shortages, survey says

The RICS Q1 2015 survey found the housing market is healthy, but private commercial space and private industrials saw a drop in workload activity

Latest progress on the Co-op building, which is to be reopened as a Premier Inn and retail outlets, Interserve quantity surveyor Dave Robson
Latest progress on the Co-op building, which is to be reopened as a Premier Inn and retail outlets, Interserve quantity surveyor Dave Robson

The North East construction market is suffering from a decline in workloads as well as labour shortages, a survey has suggested.

The latest quarterly RICS (Royal Institution of Chartered Surveyors) Construction Market Survey showed that 46% of the region’s construction professionals cited labour shortages as an ongoing issue in the first quarter of 2015.

In addition, 34% of those who took part in the research reported a rise in workloads that marked a decrease on the first quarter of 2014.

The private sector remains a healthy driver for regional growth, with 46% reporting a rise in housing workload activity.

But private commercial space and private industrials saw a drop in workload activity during the first three months of this year.

Public house building in the North appears to be stronger than elsewhere in the UK, while private house building activity is greater in the southern parts of the country, despite overall feedback from contractors that profit margins are tightening.

Within the infrastructure sector, respondents said they were seeing the fastest growth since RICS began recording UK construction market data back in 1998.

A total of 29% percent of the North East’s construction professionals saw an encouraging rise in infrastructure in the first quarter of the year, compared to just 19% at the start of last year.

Despite all the anecdotal evidence that a degree of uncertainty is entering the market in the count down to the general election, outward confidence for growth is strong, with 75% of the North East’s construction professionals expecting workloads to rise over the next 12 months.

Encouragingly, half of all the region’s respondents also anticipate a rise in employment opportunities in the sector.

Aidan Evans at Interserve said: “Activity levels still appear to be led by the private housing sector but it’s encouraging to see that more infrastructure projects are being delivered across the North East.

“The forthcoming general election appears to be stifling activity in some of the region’s sectors as organisations are holding back from spending.

“Demand for both materials and labour has also impacted on projects in terms of prices, due to limitations on both supply of materials and skilled tradesmen.

“So it will be interesting to see the outcome of the election and if it helps to give our sector the boost that it urgently needs.”

RICS director of the built environment Alan Muse said: “Despite the outward optimism, there are some very real unknowns which are impacting on industry, including the general election, the UK’s relationship with Europe and skills shortages.

“The upturn in workloads in some sectors has led to more competitive tendering, particularly across public sector projects, but a lack of accessible finance is now affecting a net balance of 55% of our members, and this will be felt most keenly among the small-medium sized SMEs.

“Now that material shortages are becoming less of an issue, the practical challenges are in providing the skilled labour the industry needs and in alleviating the financial constraints, which saw nine months of decreased lending in 2014.”

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