Construction outlook makes government housing targets unlikely

A slowing housing market has dampened confidence in the profit outlook of the UK construction industry, making it even more unlikely that the Government will reach its housing targets, says the latest RICS Construction Market Survey.

Growth in construction workloads eased back in the fourth quarter as house builders and businesses were hit by the effects of the credit crunch and demand for housing fell away. 16 percent more Chartered Surveyors reported a rise than a fall in the fourth quarter, down from 17 percent in quarter three. Meanwhile, new enquiries for housing grew at the slowest pace since 2006.

The outlook for profit remains gloomy with surveyors continuing to expect below average profit margins. Equally, confidence that workloads will increase has fallen for the fourth consecutive quarter, although it remains above the survey’s long run average.

However, skill shortages remain low as the industry continues to employ labour from EU accession countries with the UK’s open and flexible labour market providing a firm base for the industry in a period of economic stability.

Sentiment across the country varied. The construction industry in Scotland outperformed other regions with workloads experiencing eight quarters of rapid growth.

RICS senior economist David Stubbs said: “A slowing housing and commercial property market, following the credit crunch and the Northern Rock turmoil have started to hit the construction sector. Current financial instability is rocking market sentiment and may see the industry enter a period of uncertainty. Doubts are likely to intensify over the ability of the Government to meet its ambitious house building targets. Indeed, it is worth noting that new housing starts have already begun to stagnate in recent quarters.”