RICS: Slowdown seen in Scottish construction market as rising costs and uncertainty weigh on expectations

The marked slowdown in the Scottish construction market continued into the last quarter, with surveyors now reporting the weakest period of growth since the start of last year, according to the RICS Construction & Infrastructure Monitor for the third quarter of 2022.

A net +10% of Scottish respondents said workload had increased, up from +19% in the second quarter and +39% just five quarters ago.

This trend towards a slowdown in activity also corresponds to a deterioration in the outlook. Expectations for the year ahead have fallen to their lowest level since the start of the pandemic, as skills, cost and credit issues weigh on businesses. The net balance of workload expectations is now -1% of respondents, compared to +25% in the last quarter and +46% at the end of 2021.

In terms of current workloads, all subsectors other than private trade saw growth in the third quarter, however, reported growth is slower than it was. In the case of private housing workloads, a net balance of +15% indicates an increase in Q3, but this is down from +18% in Q2 and +37% at the end of the year last.



The main challenges facing businesses today continue to be material shortages/costs and labor shortages. 60% of respondents reported shortages of quantity surveyors, 62% reported shortages of other professionals and 59% reported shortages of masons.

With labor and material cost pressures escalating, respondents in Scotland remain relatively optimistic about the outlook for profit margins. The third quarter was the fifth consecutive quarter where there was a negative net balance on the 12-month profitability outlook, with -26% expecting lower profit margins, compared to -2% in the second quarter.

Ian Differ, Cba Qs Ltd in Glasgow, said: “Materials inflation, rising energy costs and rising labor costs are all impacting the viability of the project.”

Steven Hyde of D Blake & Co Ltd in Edinburgh, added: “After a period of relative stability, we are now seeing a further round of material cost increases”



John Murray of City Building Glasgow Llp, said: “Within the public sector in particular, the cost of living crisis and government intervention will have an impact on the budget.”

Simon Rubinsohn, Chief Economist at RICS, commented: “The deteriorating macroeconomic environment is clearly weighing on the construction industry, with access to credit now cited as a major challenge for businesses, alongside more familiar with building materials and labor. Indeed, the RICS metric capturing the extent of skills shortages in the sector has barely budged in recent quarters with quantity surveyors and a range of skilled trades in particular in short supply.

“Meanwhile, the impact of the changing economic outlook is most visible in the residential and commercial sectors where workloads are now seen as likely to stagnate in the year ahead. Ongoing commitments to a number of major projects continue to support infrastructure activity, however. The Chancellor’s reflections on November 17 may provide clues as to whether this trend is likely to continue in the longer term. »


Comments are closed.