‘Challenging’ economic climate impacting Scottish construction activity

NEW research has revealed that Scottish construction activity continued to fall at the end of last year amid financial constraints and a challenging economic environment.

The RICS construction monitor in Scotland for Q4 2022 established that a net balance of -7% of Scottish respondents said that workloads fell, compared to +10% in Q3. In the UK as a whole, workloads were reported to be flat. 

This slowdown trend corresponds with a negative outlook from Scottish surveyors, with -12% of respondents expecting workloads to fall over the next 12 months, down from -1% in Q3, and +25% in Q2. 

In terms of current workloads, all sub-sectors saw a slowdown in activity, with both public and private housing experiencing the steepest decline. In Q4, -2% of respondents reported a fall in public housing, down from +27% in Q3, and -8% of respondents reported a fall in private housing, down from +15% in Q3.

In more positive news, although there are still skills shortages across the industry in Scotland, RCIS reported it was ‘slightly less pronounced’ than in previously quarters. 58% of surveyors reported a shortage of quantity surveyors, down from 60% in Q3. Shortages in construction professionals fell from 62% to 54%, while shortages of bricklayers fell from 59% to 55%.  

RCIS added that with continued labour and material cost pressures, respondents in Scotland remain ‘relatively downbeat’ about the outlook for profit margins. Q4 was the sixth quarter in succession there was a negative net balance regarding the 12-month outlook for profitability, with -40% expecting profit margins to decline, down from -26% in Q3.

The outlook for employment is described as ‘more resilient’ though with respondents pointing to a flat picture over the year ahead.

Zander Muego of Thomas & Adamson in Edinburgh said, “There is a lack of specialist subcontractor organisations with the capacity to deliver large volume projects.”

Andrew Park of Robertson Partnership Homes in Stirling added, “There is insufficient government funding for social and affordable housing to keep pace with inflation.”

Gary Campbell from Cruden in Glasgow commented, “Inflationary increases in labour, plant and, materials are becoming unsustainable for clients.”