Materials shortages threatening pace of rebound

Aaron Morby 5 months ago

Fears are growing that materials shortages could derail the strong construction rebound.

Residential activity leads ways as all sectors of construction swing back into growth
Residential activity leads ways as all sectors of construction swing back into growth

According to an industry poll of construction surveyors, the recovery strengthened in the first three months of the year lead by strong house building activity.

Respondents to the latest RICS survey reported workloads rising, with confidence growing, in the face of greater tender enquiries and firms planning to increase hiring activity over the rest of the year.

But the majority (57%) also red-flagged materials shortages as their main obstacle to building back better.

Financial constraints and a shortage of labour also continue to be issues that are holding back projects, although financial constraints have eased since this time last year, when 70% of respondents said it was their biggest challenge, compared to 45% now.

The survey also revealed predictions of a post-Covid cut-throat period of below-cost bidding failed to materialise with tenders now reported to be coming in within 5% of costs.

The greater level of confidence is also reflected in profit margins which returned to positive territory for the first time in over two years (Q4 2019).

Simon Rubinsohn, RICS chief economist, said: “The rebound in workloads over the past quarter allied to the positive expectations for the next twelve months paints a positive picture regarding a broader recovery in the economy.

“But what is particularly encouraging is the suggestion not just the construction and infrastructure sector will start hiring once again but also that the compression in profit margins may just be beginning to turn around.

“While it will take more than one quarter to signal the emergence of a sustainable trend in profitability, the indications are that the industry has adjusted relatively well to Covid related work practices with most respondents to the survey suggesting only a small hit to productivity.

“Alongside this, the fact that over 80% of respondents are not seeing  evidence of tenders coming in below bids is another positive signal regarding how the sector has weathered this storm.”

2021 RICS Q1 construction survey

26% more respondents report rising workloads at the all sector level (+2% Q4 2020).

39% more respondents saw a rise in private residential workloads

Infrastructure workloads also picked up further with 34% more respondents reporting a rise.

Social housing and public works also increased over the quarter, as did private industrial and commercial but to a lesser extent.

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