Could materials shortages derail the recovery?

Author: Ross Sturley CIMCIG

RICS has released details of a survey which shows the recovery in the construction sector strengthened in the first three months of the year lead by strong house building activity, but is vulnerable to potential materials shortages.

Workloads are rising and confidence is growing with increasing tender enquiries and a growing intention to recruit. However, 57% of respondents said materials shortages were their main obstacle to recovery.

Financial constraints and a labour shortage are factors 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.

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.”

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