Construction sector workload divergence, says RICS

A CLEAR divergence between private and public sector construction workloads in the East Midlands became more apparent during Q2 2011, as the private sector saw further signs of recovery, but the public sector was further affected by spending cuts, says the latest RICS Construction Market Survey.

Construction related to public housing and other public works in the East Midlands deteriorated in the three months to June, as Government budget cuts continue to have an adverse effect on the sector. 16 per cent more chartered surveyors reported levels of public housing construction fell rather than rose, while the figure was 28 per cent more for other public works, such as schools and hospitals.

In contrast, private industrial and private commercial workloads in the region rose, with 12 per cent more surveyors reporting a rise rather than fall in private industrial construction and 20 per cent more for private commercial works. Encouragingly, private commercial construction levels have now been positive for three consecutive quarters.

Total construction workloads across the East Midlands stabilised in Q2, from a net balance of +7 to +2 per cent. The main issues for surveyors in the region continue to be a highly competitive tendering environment and a continued lack of funding for projects.

Perhaps unsurprisingly, given the difficult economic climate, profit expectations in the region continue to deteriorate, with the net balance falling to -31 per cent, 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 (+19 per cent more and +8 per cent more respectively).

Commenting, RICS East Midlands spokesperson, Ashley Cooper, Director of Edward Cooper Chartered Surveyors, said: “The results of the latest RICS Construction Survey clearly highlight the impact of the austerity package being implemented by the government. Public sector related construction projects in the East Midlands 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.”