Home Commercial Property Brexit uncertainty takes its toll on London building activity

Brexit uncertainty takes its toll on London building activity

by LLP Reporter
2nd May 19 2:06 pm

Political uncertainty and financial constraints have seen a halt to growth in London’s construction sector as sentiment turns negative in the capital, according to the RICS UK Construction and Infrastructure Market Survey, Q1 2019.

Growth in workloads has slowed or declined across almost all sectors of construction this quarter in London. At the headline level, 2% of respondents in London reported a fall (rather than rise) in workloads, the lowest net balance since November 2010.

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Workloads in public housing and public non-housing are holding up the sector, as a net balance of +5% and +3% of contributors reported an increase in activity respectively. In contrast, private housing and private commercial saw a decline during Q1, with a net balance of -3% and -10% more chartered surveyors reporting a drop in activity across London respectively. Industrial workloads also remain subdued with 1% of respondents seeing a fall rather than a rise in activity in the sector.

Workloads in infrastructure remained positive in London for this quarter with 14% more respondents reporting a rise in activity, although this has slowed from the 18% rise reported in Q4 2018.

Across the UK, chartered surveyors continue to report the impact that financial constraints are having on building activity. This quarter, 81% of surveyors cite this as an issue, making this the highest reading recorded in 6 years. Additionally, a lack of skilled labour was stated as an inhibitor to growth, with 47% of respondents reporting a shortage of skilled construction professionals across the sector in the capital.

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Looking ahead, contributors in London remain positive, with a net balance of +21% more respondents expecting to see workloads rise in the next 12 months. This is teamed with a good outlook for employment, with +12% more respondents predicting a rise within the sector. Expectations on profit margins however remain negative, with -5% of London respondents predicting a fall over the coming year.

Looking across the UK regions, housing and infrastructure activity have supported workloads in the South West, Wales, Midlands, East and the North, with workloads remaining broadly flat elsewhere. Looking ahead, respondents in the North are the most optimistic as they expect workloads to grow and more hires to take place (+43% and +26% respectively).

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Jeffrey Matsu, RICS Economist said, “Financial constraints continue to impede growth across the industry as lenders respond to recent events such as Carillion and Interserve with less generous lending criteria, particularly to SMEs.

“Although market confidence has become more subdued in recent quarters, the outlook for workloads and employment growth has modestly improved. While prolonged Brexit-related uncertainty has taken a toll on business investment, its resolution has the potential to unleash pent-up demand that can be supportive of future growth.”

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