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Outlook for UK construction industry worsens in face of spending cuts

Some 59% of chartered surveyors reported there had been no movement in construction workloads during the third quarter of the year, according to the latest Construction Market survey from the Royal Institution of Chartered Surveyors.
Of those who did see an adjustment, it was downwards, with 10% more surveyors reporting that workloads fell rather than increased. Insufficient funding for new developments and continued concerns over the economy were among the factors cited as affecting construction projects.
Significantly, the report shows that surveyor sentiment was negative for all sectors of the construction industry. Perhaps unsurprisingly in light of government spending cuts, the worst affected areas were public housing and other public works, with negative net balances of -32 and -23 respectively. Sentiment over public housing workloads is now at its lowest level since the survey began in 1994.
Across the UK, all regions reported negative net balances in the third quarter. Northern Ireland recorded the largest deterioration in workloads, with the net balance at -63. Scotland also experienced sharp declines in workloads as did the South West and Wales.
Skill shortages for tradesmen remain close to historic lows with just 2% of surveyors reporting difficulties with recruiting workers. However, there here were slight rises in demand for plumbers and electricians. Looking ahead over the next 12 months, 20% more surveyors expect employment to fall further rather than rise.
The overall outlook for the coming year also worsened, with surveyors reporting output expectations falling at a faster rate than projected at the time of the previous survey. Indeed, the net balance for output expectations now stands at its worst level since the first quarter of 2009. Meanwhile, a substantial majority of surveyors continue to expect profits to fall further over the next twelve months.
‘Government data shows the construction sector has rebounded more strongly than many anticipated but our latest survey casts considerable doubt on whether this improvement can be sustained. The collapse in public funding will inevitably have a major impact on the sector,’ said RICS chief economist Simon Rubinsohn.
‘Worryingly, the responses from small businesses operating in the construction industry indicate that they are being squeezed by increased competition for projects from larger firms. Indeed, their long term viability is being put in danger a time when government has pledged to help small businesses,’ he added.