Construction workloads across the Midlands have fallen for another quarter as the sector grapples with the economic effects of the COVID-19 pandemic, but growth expected from upcoming infrastructure and private housing projects buoy the sector’s chances of a recovery.
While workloads at the all sector level fell by a net balance of -10% this quarter, it is less than the previous fall of -32% in Q2. However, when compared with last year’s industry average of +13% it shows construction in the Midlands is far from full recovery.
Breaking down across each sector, workloads fell the most across the private commercial and infrastructure categories, with net balances of -22% and -12% respectively. Alongside this, workloads fell once again, but to a lesser degree, across the private housing and other public works. This quarter respondents reported little change in workloads in private industrial, whilst public housing improved following the declines in Q2, as a net balance of +22% reported a pick-up in activity.
Respondents said that financial constraints and shortages of materials, coupled with insufficient demand, were the main reasons for the subdued activity. 31% more respondents also cited a deterioration in credit conditions, which is having a negative impact on the cashflows of some businesses.
Looking ahead, 39% more respondents expect infrastructure workloads to rise rather than fall in the coming year, closely followed by the private housing sector – offering the construction sector a glimmer of hope as it recovers from COVID-19. Anticipated changes to the planning system, an extension to Help to Buy as well as the stamp duty holiday look likely to support growth in construction activity.
However, despite fewer respondents reporting a fall in the number of new business enquiries across the Midlands, profit margins are envisaged to decline over the course of the next twelve months with a net balance of -16% of respondents expecting a fall.
Simon Rubinsohn, RICS Chief Economist, said: “With a new lockdown now underway, these are clearly very challenging times for the economy.
“The government’s commitment to delivering on its infrastructure programme provides a ray of light with the survey pointing towards a solid increase in workloads over the next twelve months which could play an important role in helping to drive a wider recovery in business activity.
“The private residential sector is also expected to see solid growth aided by the various policy initiatives that are still in play. However, commercial development is anticipated as being flatter in the face of the structural pressures facing both offices and retail.”