Construction firms say finance is ‘biggest challenge’ right now

Financial constraints on firms are the “number one factor” limiting construction output in the UK, a leading trade body reported.  

Worsening credit conditions and a challenging financial landscape are the top issues holding back construction activity in Q2, sector respondents told the Royal Institution of Chartered Surveyors (RICS) in a recent survey. 

“Many respondents voice their concerns about the ongoing broader economic challenges and money-tightening policies of the Bank of England negatively impacting the industry,” said RICS. 

The credit environment deteriorated over the past quarter, with a reading of -42%. 

While 64% of industry respondents said financing was their ‘biggest challenge’. 

Skills and labour challenges persist, with more than half of respondents struggling to recruit quantity surveyors, while bricklayers and carpenters were also in high demand.   

However, more than 25% of firms plan to increase spending on training programmes to tackle the problem. 

RICS recommended investing in skills to prepare for digital transformation – and lobbied for more international recruitment to the Shortage Occupation List (SOL). 

“Realistically, to deliver on housing targets, investment is needed to build up a diverse future pipeline of construction skills, in particular to embrace digital and green technologies. In the short term, however, there should be more flexibility for international recruitment,” said RICS head of professional practice – construction, Amit Patel. 

Despite these challenges impacting activity, the sector remains “moderately positive” about the future, said RICS. 

Infrastructure remains the strongest growth area for the industry, with a +17% reading this quarter. 

Indeed, more than 27% of respondents predict a workload expansion in infrastructure. 

And commercial workload expectations remain relatively upbeat at +12%. 

Private housing output, however, was at -12%, close to where it was at the end of 2022.  

“Feedback to the Q2 survey shows the rising trend in base rates is leading to increased financial pressures in the construction industry,” said RICS chief economist, Simon Rubinsoh. “This is not anticipated to lessen any time soon and is also reflected in the cautious assessment regarding the outlook for profitability.  

“However, there are some signs of an easing in the extent of skill shortages which is accompanying the flatter trend in activity. Infrastructure numbers remain solid, but the survey provides further evidence of the challenges in delivering residential developments at the current time.” 

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