UK Construction Falls Sharply Amid Rising Costs from Iran War, RICS Finds
RICS Survey Reveals Impact on UK Construction Sector
Sharp Decline in Construction Activity
LONDON, May 7 (Reuters) - Activity in Britain's construction sector shrank at the strongest pace in almost six years in the three months to March, according to a survey on Thursday that also showed the war in Iran had increased firms' costs.
The Royal Institution of Chartered Surveyors said the industry's net workloads balance dropped to -12% in the first quarter, down from -6% in the previous quarter. Thursday's reading was the weakest since the three months to June 2020 when it dropped to -36 as building sites were closed due to the COVID-19 lockdown.
Expert Commentary on Industry Challenges
"The impact of the war in the Middle East is clearly visible in the Q1 RICS Construction Monitor. Rising material costs, a tougher credit environment and increased pressure on margins are already leading some developers to slow construction activity," RICS Chief Economist Simon Rubinsohn said.
Key Findings from the RICS Survey
The survey also showed:
Factors Affecting Sentiment and Margins
• War in Iran as well as concerns about oil prices and material costs weighed on sentiment
• Business' profit margin expectations dropped sharply to -27, weakest since Q4 2022
Rising Costs and Future Expectations
• Construction costs expected to rise by 6.6% over the next 12 months, materials costs projected to jump by 7.5%
• Companies in the private sector are scaling back plans for the coming year
• Expectations for house-building are now flat as firms worry about impact of planning changes
Employment and Infrastructure Outlook
• A net balance of +8 firms expect to increase hiring compared to +14 in the previous quarter
• Infrastructure only bright spot, although momentum is fading
• The quarterly survey was based on responses from 938 firms
(Reporting by Suban Abdulla; editing by David Milliken)
