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Private sector construction shows further signs of recovery

Construction related to public housing and other public works deteriorated in the three months to June, as Government budget cuts continue to have an adverse effect on the sector. Some 17% more chartered surveyors reported levels of public housing construction fell rather than rose, while the figure was 24% more for other public works, such as schools and hospitals.

In contrast, private housing and private commercial workloads rose, with 3% more surveyors reporting a rise rather than fall in private housing construction and 16% more for private commercial works. Encouragingly, this is the first time since 2007 that private housing has been positive for two consecutive quarters, the report says.

Total construction workloads across the UK edged down in the second quarter from a net balance of +6 to +2%, although over half of all respondents noted no actual change in workloads. The main issues for surveyors continue to be a highly competitive tendering environment and a continued lack of funding for projects.

As in many sectors of the UK, there continues to be a wide regional variation in the construction industry's fortunes. Workloads in London/South East continued to rise, albeit at a slower pace, while in much of the rest of the country workloads were flat or slightly down. The exception to this is Northern Ireland where 64% more respondents suggested that workloads fell rather than rose.

Perhaps unsurprisingly, given the economic climate, profit expectations continue to deteriorate, with the net balance falling from -30 to -34%, reflecting the continuing pressure on margins as input costs rise more rapidly than output prices. Despite this, workload and employment expectations for the coming 12 months remain positive, albeit at low levels of +10% more and +6% more respectively.

‘The results of the latest RICS Construction Survey clearly highlight the impact of the austerity package being implemented by the government,’ said RICS chief economist, Simon Rubinsohn.

‘Public sector related construction projects are being reined in while some tentative signs of recovery are visible in the private sector. It is particularly encouraging that development in the private commercial sphere is continuing to pick-up in the face of the challenging economic backdrop. Residential workloads also continue to edge upwards but, for the time being, at an insufficient pace to meet medium term housing need,’ he added.