According to the results of the Q2 2018 RICS UK Construction and Infrastructure Market Survey, 7% more chartered surveyors in Scotland reported that their workloads had risen rather than fallen over the period. This figure was moderated from a net balance of 11% in Q1.

Around 80% of respondents in the UK noted that financial constraints were a limiting factor to building activity – the joint highest reading in five years. Respondents have often cited financial constraints to be causing difficulties in recent reports, and more specifically access to bank finance and credit, cash flow and liquidity challenges or less favourable cyclical market conditions.

Alongside financial constraints, planning delays and restrictive regulations have also been cited as continuing to limit activity. Although labour shortages continue to be referenced as a factor impeding growth, the number of respondents citing this as the most prominent factor has dropped.

The RICS quarterly series indicated growth eased across nearly all sectors in Q2, with infrastructure and public non-housing observing the sharpest slowdown in Scotland. Private house building workloads remained positive during Q2 2018, with a net balance of 17% more respondents reporting an increase in activity. Additionally, private commercial activity turned positive, although at a steady pace, with a net balance of 5% more chartered surveyors reporting an increase in workloads across the sector.

Moving to industrial workloads – contributors reported a flat reading, which depicts activity in the sector since the beginning of 2018.

Despite the uncertain outlook for the economy, 39% more respondents expect activity to rise in the Scottish construction market rather than fall in the next 12 months. Alongside this a net balance of 30% foresee an increase in hiring throughout the sector in the next year.

Although tender price expectations over the next twelve months moderated in Q2, +54% and +48% more respondents continue to envisage greater price pressures in the building and civil engineering areas, respectively. The expected rise in tender prices may signal rising input costs and shrinking profit margins for businesses. Indeed, expectations on profit margins eased from a net balance of +15% to +5% in the latest results.

Jeffrey Matsu, RICS senior economist, said: “Although growth in the sector has moderated, ongoing capacity constraints have ensured a steady pipeline of work with robust expectations for the year ahead. With businesses continuing to hire to meet this pent-up demand, the effects of any uncertainty generated by Brexit or recent market events, including Carillion, may only become more evident in the longer-term.”

Yesterday a survey by the Federation of Master Builders Scotland revealed that Scotland’s small and medium-sized construction firms enjoyed strong growth in the second quarter of 2018 despite the continuing skills shortage and a rise in material costs.