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Industry growth hits 12 year low

Growth in construction workloads has dropped to its lowest level for more than a decade.

New figures from the RICS show the industry is suffering from the twin effects of the credit crunch and the slump in demand for housing.

Only 22 per cent of surveyed companies had an increased workload during the first quarter of this year, in comparison to 36 per cent in the same quarter last year. This figure was the worst since 1996, the year it began compiling the survey.

There was also a significant rise in the number of firms that recorded a drop in work during the first part of the year, with 20 per cent experiencing a lower workload than the previous quarter up from 7 per cent last time.

The worst affected industry was private housing with workload growth in the sector turning negative for the first time since 1999.

RICS said while private housing had weakened in all regions, the fall was due mainly to a downturn in the north.

But it added that the market was now static in London and the South-east, Wales, the Midlands and Northern Ireland.

Other figures revealed that expectations for profits fell for only the second time in the survey’s history while confidence that workloads will increase has fallen for the fifth consecutive quarter.

In an attempt to strengthen the future of the sector, the RICS has called on London mayoral candidates to urgently examine the current 50 per cent housing affordability target if elected.

A new manifesto presented to representatives for each of the contenders at a forum last week claimed the present target could weaken the already depressed market and result in fewer affordable homes actually being built.

Proportion of firms reporting a rise, fall or no change in construction workloads for the quarter
Rise % Same % Fall % Balance*
2007 Q1 36 56 7 29
2008 Q1 22 58 20 2

* Balance = Proportion of surveyors reporting a rise in workloads minus those reporting a fall

- For total workloads, Scotland continues to be the strongest performer, followed by Wales

- The private sector housing workload – growth having weakened over five successive quarters – is now falling

- Workload growth in the commercial sector weakened but remains positive, whilst workload in the industrial sector accelerated

- Overall, respondents now expect profit margins to fall and expectations are the lowest in the survey’s history

- Only respondents in Scotland and Northern Ireland expect growth in profits

- Confidence in future workloads pulled back for the fifth consecutive quarter


More from the RICS construction market survey first quarter 2008:

Total workloads

- The north, where workloads are now falling, is by far the weakest region in the UK.

Private/public housing

- Growth in public sector housing slipped, but remains solid. It recovered strongly in the midlands and improved in the south west, but slipped significant in Wales and the north and to lesser extents in other regions.

- The private sector housing workload, growth having weakened over five successive quarters, is now falling. The fall is due mainly to a downturn in the north, but private housing weakened in all regions and is now static in London and the south east, Wales, the midlands and Northern Ireland.

Private commercial

- Commercial workloads are now falling in the south west, north and Northern Ireland.

- While workload growth remained positive in other regions, they also suffered reductions - London and the south east was the least affected and Wales the most.

- In the industrial sector, work load recovered strongly in Northern Ireland and London and the south east. It remains static in Wales and the rates of growth slowed somewhat in Scotland and the north.

RICS manifesto recommendations:

The mayor and the GLA should:
- Urgently examine how the 50 per cent affordability target can be delivered through the likely tough economic conditions of 2008 to 2010
- Focus house building on major regeneration opportunities
- Ensure increased choice of suitable new private homes for an ageing London
- Set ambitious targets for completing cost-effective insulation of London's current building stock
- Ensure that the most viable initiatives are promoted first, including considering whether emissions for development can be offset through funding initiatives elsewhere
- Aim to ensure that London's planning service is amongst the best in the world in order to meet critical housing needs and attract business investment
- Second specialist planners from the GLA planning team to support local boroughs on major projects and applications
- Ensure London planners have the skills to deliver increasingly complex policies relating to climate change, housing and the forthcoming Community Infrastructure Levy
- Provide a full assessment of the skills needs for providing increased house building in London and the delivery of the major construction projects, such as Cross Rail
- Work with professional bodies and private employers to develop a scheme encouraging young people to enter the property sector

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