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Skills shortages and material costs impacting on Welsh construction activity despite strength in workloads

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Construction market activity continues to rise in Wales despite rising material costs and ongoing skill shortages, the Q1 2022 RICS UK Construction and Infrastructure Monitor suggests. However, the sector doesn’t expect to make a profit this year.

Regarding Wales, a net balance of +40% of respondents reported a rise in workloads in the quarter, up marginally from +37% in Q4 2021. Workload growth is across the board but is firmest regarding infrastructure projects, alongside activity related to the development of public and private sector housing.

45% more respondents reported a rise in infrastructure workloads than reported a fall. The net balances for private housing and public housing were +48% and +54% respectively.

However, despite the growth in current workloads, the impact of global supply shortages, rising costs and a lack of skilled workers are impacting on activity. When it comes to labour, 66% of respondents said that they were experiencing a shortage of quantity surveyors, whilst 67% reported shortages in other construction professionals and 65% pointed to a lack of labourers.

Despite the current challenges, respondents still remain relatively optimistic for the coming year ahead regarding workloads. However, they expect profit margins to be severely impacted by rising costs. A net balance of +36% of respondents expects workloads to rise in the next 12 months. However, expectations for profit margins are now firmly negative with a net balance of –25%.

Aled Davies of VINCI Construction UK Limited in Cardiff said that material prices are increasing exponentially.

Peter Jenkins of Willis Construction Limited in Cardiff said that the impact of the war in Ukraine is being felt in fuel and material costs as well as their availability.

RICS Chief Economist, Simon Rubinsohn, commented: “The good news in the latest report is that the industry remains positive about the outlook for activity and that the generally upbeat mood can be seen not just in regard of infrastructure and housing development but also in the commercial sector. However, it is clear that the sector faces significant challenges which have been reflected in recent official data showing a sharp rise in vacancies across the construction industry. RICS numbers demonstrate these shortages are pretty much across the board including quantity surveyors and project managers as well as both skilled trades and more general labour. This, combined with problems around accessing building materials in the current environment, is exerting significant upward pressure on construction costs at the present time.”