The Q2 2020 RICS UK Construction and Infrastructure market survey results predictably showed a contraction in output, as workloads declined across all sectors. Anecdotal commentary from respondents also suggested that labour shortages, some due to furlough, and difficulties in acquiring materials through the supply pipeline are causing projects to stall.

To gauge the impact of COVID-19 and the subsequent lockdowns, the Q2 survey gathered additional data on project delays, productivity and bids coming in at below cost. Significantly, 80% of the survey contributors noted that projects have been put on hold across the UK with only 23% of the contributors believing that projects that are currently on hold are likely to restart imminently. Anecdotal evidence also suggested that some projects are retendering due to costs.

In Q2 2020, 36% of contributors reported a decline rather than a rise (net balance) in headline workloads, as they slipped across all areas covered by the survey. This, plus the fact that 27% more respondents reported a fall in private housing workloads, ended a run of seven years of positive activity. A solid decline in output was also reported across public housing and the other public works categories, as some anecdotal evidence reported that council spending has seen a decline.

Meanwhile, for the first time since 2012, there was also a decline in infrastructure workloads with 17% more contributors reporting a fall (as opposed to a rise) during Q2.  Commentary from respondents, suggests that as well as delayed spending due to uncertainty, a lack of labour is also impacting infrastructure projects despite the commitment to these projects still being very apparent.

The RICS market confidence indicator, a composite measure of workloads, employment and profit margins expectation for the coming 12 months remains close to a decade low. Within this, profit margins are expected to decline in the year ahead with a net balance of -41% of contributors anticipating a fall.