Key takeaways – the watchword is ‘caution’
- Workloads flatlining over next 12 months
- Infrastructure ‘a beacon of light’
- Skills shortages persist
- Financial constraints loom
by Rory Butler / January 17, 2023
We are champions of the industry here at Construction Wave. Our mission is always to provide value to our readership by taking a broad view of the landscape and telegraphing things we think firms should know and prepare for to thrive in the future.
No doubt some of the details of the 2023 Construction Roadmap will not come as a surprise, we all know the macroeconomic pressures. But oftentimes it comes to us in pieces and from single sources.
To help, we mined the key predictions for the sector in 2023, as laid out in the Q4 2022 UK Construction Monitor by RICS. More than 2,000 construction professionals contributed to the report, which should provide greater insight into what the industry is saying. What keeps it awake at night.
The word “predictions” is obviously problematic. The reality is we simply cannot know for certain what the external forces will be. But we can review recent performance and highlight the conversations happening onsite to gain a more informed view.
Here’s what the report said…
Private sector dip
- Housing: -13% in Q4 2022 against +17% in Q3
- Commercial and industrial: both at -2% in Q4
- Infrastructure: net balance +22% in Q4
- Public works and public housing “positive”
- Energy within infrastructure: “strongest” +45%
Financial constraints
- Labour and materials shortages continue
- Issue of financial constraints rises for four quarters, highest since Q3 2020
- Credit conditions worsened in past three months, said 46%
- Credit conditions will get tougher in 2023, said 35%
- Inadequate demand, said 28%, highest since pandemic
Recruitment and retention
- Skills shortage “as prevalent” among trades as professionals
- Quantity Surveyors and Project Managers hard to find
- Bricklayers, electricians and plumbers also scarce
- Increased spending in workforce development and training in 2023
- Retention and culture of retention an issue
‘Subdued activity’
- Workloads ‘lose momentum’ in 2023
- Private residential down
- Private non-residential down
- Infrastructure ‘still encouraging’
Profit
- Profit margins over next year -26%, lowest since Q3 2020
- Tender prices ease more than construction costs
- Skilled labour costs to increase by 7% in aggregate
What the industry is saying
London
“The lack of available skilled construction professionals is the main hinderance to growth currently,” Chris Barrett, Barrett Bros Construction.
“Projects becoming unviable if sales or rental values cannot absorb cost increases,” Daniel Robins, RPS Group.
“Severe delays in planning application determination,” James Burnett, South London & Maudsley NHS Foundation Trust.
“Competition within the UK mega projects are making things worse for small/medium sized projects to access resources,” Jeonghyun Lee, Riverlinx CJV.
“Delays in procurement not previously encountered,” Alan Stokes, Universal Security Systems.
“Material price increases are affecting certainty of tenders, many contractors are at capacity,” Alexander Francis, Jackson Coles.
“Uncertain future for building control,” Andrew Wignall, Salus.
“The need to design and build more sustainable assets,” Andy Tims, Arcadis.
“Public perception of inflation and the state of the economy is leading to reluctance for commencing projects,” Anthony Thompson, JJ & A Thompson.
North East
“Key issue is delays in materials and continuing shortage of staff resource across all areas,” John Thompson, Home Group Ltd.
“Perceived remoteness of some locations, impacting upon communications and travel infrastructure,” Louise Dale, North Yorkshire County Council.
“Concerns over volatility of inflation,” Paul Nixon, Kier Property.
North West
“Brexit is causing skilled labour shortages,” Andrew Murta, HKA.
“Rising material prices. Lack of skilled and unskilled labour. Lack of investor confidence,” Andrew Bayley, Poole Dick Associates.
“Sub-contractors not willing to see changing market conditions up the chain, this is stagnating projects,” Carl Glover, Innov8 DS.
“Complexity of new building registrations, achievability of new energy ratings, and delays via planning system,” Gary Szilagy, Rowley Szilagy LLP.
South West
“Rising uncertainty in borrowing costs will have a negative effect on the residential market,” John Banyon, Gateway Surveyors.
“In a very volatile materials supply market, forecasting future workloads is very difficult,” Mark Cox, Cox Developments SW Ltd.