Construction outlook worst for a decade

Growth in construction workloads has fallen to the lowest level for more than a decade as house builders and businesses are hit by the effects of the credit crunch and falling demand for housing.

The latest RICS UK Construction Market Survey reports that workloads are at the worst level since 1996 with only 1% more chartered surveyors reporting a rise than a fall, down from 16% in the fourth quarter of 2007.

The worst hit sector was private housing with workload growth in this sector turning negative for the first time since 1999. The fall is due mainly to a downturn in the North, but private housing weakened in all regions and is now static in London and the South East, Wales, the Midlands and Northern Ireland. Nine percent more chartered surveyors reported a fall than a rise in private sector housing workloads, down from the positive figure of 16% last quarter.

Expectations for profit margins fell for only the second time in the survey’s history with surveyor sentiment falling sharply as growth in the private commercial and private housing sectors slowed. Equally, confidence that workloads will increase has fallen for the fifth consecutive quarter, falling below the survey’s long run average.

RICS senior economist David Stubbs said: “Growth in the construction industry has slowed abruptly in the first quarter of this year. Private residential workloads are now shrinking as home builders react to challenging conditions in the housing market by reducing the number of new homes under construction. This emphasizes the difficulty that the Government will have in encouraging higher house building levels during periods when the housing market is soft.

“Although they grew slightly, private commercial workload growth has slowed rapidly as the downturn in commercial property prices and the looming oversupply in the pipeline, forces developers to shelve plans for future construction. We think it is likely that the combination of reduced building activity in private housing and private commercial sectors will act as a major drag on the construction industry over the balance of this year.”