The construction sector is losing its patience with Brexit uncertainty, according to Q2 2019 RICS Construction and Infrastructure Market Survey, as workloads for social housing construction rises. It is also important to consider how Construction Arbitration may impact decisions and contracts within the sector.
Rising Workloads in Housing Construction
This quarter, 16% more respondents reported an increase in construction workloads, up from a +9% net balance in Q1. Workloads in public housing grew at the fastest pace, closely followed by private housing. The rise in workloads in social housing (+26% up from +6%) suggests that the lifting of the HRA borrowing cap may have begun to influence sentiment in social housing construction. This is according to RICS’ construction and infrastructure survey. When disputes arise over these public projects, Construction Arbitration can offer alternative resolution methods.
Infrastructure and Commercial Sector Performance
After a dip in Q1 2019, workloads in the infrastructure sector improved in Q2 and there was also modest growth in commercial and public non-housing activity. Looking to the year ahead, workloads are expected to be most resilient in the private housing and infrastructure sectors. In fact, 27% and 25% more surveyors, respectively, anticipate activity to rise rather than fall. Additionally, Construction Arbitration remains an essential tool for managing disagreements as activity increases.
Growth in Business Enquiries
Business enquiries for new projects or contracts continued to bolster this quarter as 12% more respondents of the construction and infrastructure survey reported an increase rather than a decrease over the past three months – unchanged from Q1. Notably, Construction Arbitration can facilitate contract resolution when needed in these new projects.
However, capacity continues to constrain potential activity with 38% more surveyors having to increase headcount in the past three months to support new work, despite the ongoing recruitment challenges. In cases of contract disputes resulting from recruitment or workload issues, Construction Arbitration could be a valuable process.
Key Barriers to Growth
Infrastructure Outlook and Funding Concerns
Investments related to equipment, software and worker training are expected to gather pace as well, according to the construction and infrastructure survey. However, for the fourth consecutive quarter, profit margin expectations remained flat and tender price expectations eased. Should conflicts persist over pricing or investments, Construction Arbitration is available to help settle such matters.
Expert Commentary and Industry Outlook
Jeffrey Matsu, RICS senior economist, commented: “Three years on and the long, unrelenting shadow of Brexit uncertainty is testing the mettle of the construction industry. After a prolonged period of delays and underinvestment, businesses now appear to be fed up and are proceeding cautiously with new hiring and intentions to invest. Arbitration specific to construction remains a useful way to address ongoing disputes between parties.
“While much of this is likely to be backfilling or maintaining existing capacity, the requirements of larger projects such as Hinkley Point C and HS2 are constraining growth opportunities elsewhere. With the range of possible outcomes related to Brexit as wide as ever, we expect to see continued volatility in the construction output data but in the meanwhile foresee workload activity stabilising.” For major projects, Construction Arbitration might be necessary to solve conflicts efficiently.
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