Construction activity in Wales is expected to slow down over the next 12 months as material and labour costs continue to soar, a new report reveals.
According to the RICS construction and infrastructure monitor for Q3 2022, expectations for Welsh construction activity turned negative for the first time since the height of the pandemic.
Responding to the RICS survey, chartered surveyors in Wales said they expected anticipated workloads in one year's time to be lower at -4%. This was down from +14% of respondents in Q2 and +49% this time last year, highlighting a marked deterioration in confidence.
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When asked about factors limiting activity currently, survey respondents pointed to shortages of labour, shortages of materials and financial constraints. Anecdotally, members pointed to cost inflation and concerns about the pipeline of work as major concerns going forward.
In terms of labour shortages, 65% of respondents said that they were experiencing shortages of quantity surveyors and 62% reported a shortage in other construction professionals.
A net balance of +15% of respondents said that their current workloads were higher in the latest quarter. This was down though from +37% just two quarters ago.
At the sub-sector level, most areas in Wales were still reporting growth, but that growth is reported to be weaker than earlier in the year. The one sub-sector now in contraction is private commercial activity with a net balance of -10% of respondents.
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Jamieson Edwards of Uzmaston Projects in Haverfordwest said: “In terms of materials, supply chains are still facing issues. Costs are also increasing, and the quality of trade labour is decreasing.”
Andrew Loring of Alun Griffiths Contractors Limited in Abergavenny said that inflation, a lack of material resource, and lack of labour were impacting hard on the sector.
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Glen Maggs of SCP Construction Cost Consultants Ltd based in Swansea and Cardiff said: “There is a fiscal drag on public sector funding, which is not keeping pace with increasing construction costs.”
Simon Rubinsohn, Chief Economist at RICS, said: “The deteriorating macro environment is clearly taking a toll on the construction industry with access to credit now being cited as a key challenge for businesses alongside the more familiar issues around building materials and labour. Indeed, the RICS metric capturing the extent of skill shortages in the sector has barely budged in recent quarters with quantity surveyors and a range of skilled trades in particular short supply.
“Meanwhile, the impact of the shift in the economic outlook is most visible in the residential and commercial sectors where workloads are now viewed as likely to flatline over the coming year.
"Ongoing commitments to a number of big projects is, however, continuing to support activity in the infrastructure area. The thoughts of the Chancellor on November 17th may provide some clues as to whether this trend is likely to be sustained over the longer term.”
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