Construction industry shows signs of strength

Further evidence of growing strength in the construction economy has emerged, with a high number of surveyors reporting a rise in workloads during 2006.

The good news came in the latest RICS survey, which has found that a higher number of surveyors saw construction workloads go up during the year so far, compared to the number reporting rises at the end of 2005.

Some 34% of the 178 respondents to the RICS quarterly construction survey reported that construction workloads have picked up in the first quarter of 2006, while just 11% reported a fall.

This is up on the 30% who saw a rise in the last three months of 2005, and a slight increase on the 33% who were positive at the beginning of 2005.

David Stubbs, RICS economist, said: "Gathering strength is evident in several areas of the industry with growth in the housing sector the strongest in almost two years as buyer activity has improved."

Of the surveyors questioned, 23% reported a rise in private housing work, up from 20% at the end of 2005. However, growth in public housing workloads fell to almost zero, the lowest result since the third quarter of 2002.

Stubbs said that rising property values for commercial property market were bolstering workloads in the sector. Some 38% of respondents reported rising activity in the sector, up from 28% in the final quarter of 2005.

Industrial construction has gone up sharply too, continuing its recovery from the falling workloads of the second quarter of 2005. Non-housing public and infrastructure work has also gone up strongly.

Scotland, Wales and the North have seen the highest increases in workloads, driven by strong private house building and commercial property construction.

Construction in Scotland grew at its fastest rate since the beginning of 2001 and expectations for the next year are for strong growth for workloads, employment and profits, well above the long-term average.

Welsh workloads accelerated quickly, while the North saw construction grow at its fastest pace since the fourth quarter of 2004. The boost has prompted the RICS to revise its expectations for workloads and employment above the long-term rates.

Across the industry supply of labour has seen a marked improvement, with only 28% of respondents reporting a shortage of skilled workers. This is the second lowest reading in the survey's history and it down sharply from the 38% reported in the first quarter of 2005.

A steady supply of Eastern European labour has helped with this, and has also depressed wage inflation.

The report also said that profit margins are expected to stay similar to those over the last six months. Stubbs also predicted that the high cost of energy and sharp increases in the price of materials are set to balance out against rising property values.

See today's edition of QS News for more new on the UK construction economy.