Labour and supply chain pressures could limit construction

The construction supply chain has struggled to keep up with increasing new housing and infrastructure across the UK, according to the latest construction and infrastructure survey from the Royal Institution of Chartered Surveyors (RICS).

The survey, covering Q2 2021, found that total workloads showed strong growth with 38% of respondents reported a rise, but with problems reported with the cost of materials and shortage of staff to deliver projects.

Growth in the private residential sector continued to lead the construction market, with 50% of respondents reporting an increase in activity (up from 39% in the previous quarter and the strongest increase in the last six years). Infrastructure works also saw a rise, with 45% reporting an increase, up from 34% in the previous quarter. New energy projects in particular were cited as the area behind this growth.

While respondents indicated the construction sector is now broadly recovering well from the COVID-19 pandemic, constraints on the market’s return to normality were also becoming apparent. 82% of respondents pointed to a shortage of materials hampering the market during Q2, up from 57% previously. The cost of materials is expected to increase by nearly 10% over the next twelve months, with these projections running ahead of the 7% growth anticipated for tender prices.

The Q2 survey also picked up concerns around labour shortages – both for skilled labour and ‘white-collar’ roles, with 64% saying a lack of labour will limit new activity. In particular, the survey found that in the case of bricklayers this concern has jumped from 34% to 58% while for carpenters it has increased from 33% to 55%.

Simon Rubinsohn, RICS chief economist, said: “The tone to much of the feedback received in the Q2 construction and infrastructure monitor is pretty upbeat with new business enquiries picking up smartly and this being reflected in the expectation that workloads will continue to grow strongly over the next year.

“Yet it is abundantly clear that a couple of issues present big challenges. Most notably at this point, the availability of building materials stands out as a key problem for respondents to the RICS survey.

“But almost as significantly, labour and skills are increasingly being cited as obstacles for businesses looking to build out existing commitments or embark on new projects. For the time being, the issue appears most visible regarding skilled trades but quantity surveyors are also being highlighted as an area of growing shortage. Unsurprisingly against this backdrop, some concern is being expressed about rising construction costs.”

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