Slowdown not all bad news

Construction activity fell by 1.5% in the first quarter of 2005, the report said, while job vacancies in the sector are now down by 14% compared to July 2004.

Milan Khatri, chief economist at the RICS, said: “While the construction industry has slowed, the ease up in the labour market is probably welcome.”

The RICS Economic brief for August said figures provided by the DTI showed that the drop in construction activity was led mainly by the reduction in public non-residential construction.

The RICS said this market accounts for 10% of all work and any reversal in activity in the area would therefore influence the general sector.

Weakness in construction was also evident in private industrial work, which declined by 14.8% over the year. This was mainly caused by a reduction in factory construction.

A 6% drop in repair and maintenance work in the private housing sector was also seen. The dip was due to higher interest rates and a slower housing market.

Construction firms reported to the RICS that the slowdown had eased wage rises in the industry and softened the problem of labour and skills shortages that was experienced in early 2004, when the industry was growing rapidly.

Khatri added: “Although the sector has slowed, it is still growing by 2-3% a year and that’s a healthy rate. The level of public works may have dipped but the overall level of public spending is quite high and is expected to grow by the end of the year. On the whole, it’s not too pessimistic a picture.”