Karli Edmondson
Posted: Wednesday, August 18, 2010 11:24 am

Sentiment in the construction sector began to decline again in the second quarter of the year, as fears over the scale of public spending cuts and ongoing uncertainty about prospects for the economy hit the construction industry, says the latest RICS Construction Market Survey, published today (18 August 2010).

In Scotland, the latest data shows seventeen per cent more surveyors reported a fall than a rise in total construction workloads. This is in comparison to the previous quarter where only six per cent more surveyors reported falling, rather than rising workloads.

Most sectors of the Scottish construction industry experienced a drop in workloads, although public non-housing and public housing were both broadly unchanged (net balance of -29 and -27 respectively). Perhaps unsurprisingly, in light of limited funding, the worst affected areas were within the private sector, with commercial showing a drop into the negative from a net balance of +4 in Q1 to -28 this quarter, and industrial also feeling the strain, falling from -18 to -25.

Future workload expectations have also dropped, with 58 per cent more surveyors expecting workload to fall rather than rise in the coming 12 months. 

In addition, the outlook for output and profit margins has turned significantly more negative within Scotland. Profit margin expectations have been the most adversely affected, with 76 per cent more surveyors expecting profits to fall rather than rise. 

Expectations for employment adds to the challenging future of the Scottish construction market, as the data revealed 42 per cent more surveyors expect employment to fall than rise over the next year, compared with 20 per cent in the previous three months. 

Commenting Neil Freshwater, RICS Scotland, said:

“This survey suggests that it is too early to conclude that the construction industry is on the road to recovery despite the strong contribution the sector appeared to make to the latest GDP data. Significantly, spending cuts are already having an adverse effect on sentiment and although the cost of tradesmen and overheads continue to fall, raw material prices are rising – creating a difficult operating atmosphere especially within the private sector.

“Surveyors are also reporting an increase in competition for work as larger firms bid for smaller projects. Meanwhile, a continued lack of clarity from the government on existing projects is adding to the uncertainty. Given all these factors, it’s of little wonder respondents to the survey are feeling gloomy.”