RICS: Pandemic Impacts Are Felt Across Construction Sector
RICS and the Association for the Advancement of Cost Engineering (AACE) recently issued second-quarter results for their U.S. Construction Monitor as part of the North American Construction Monitor and alongside the Global Construction Monitor. As expected, the COVID-19 pandemic and the related economic lockdowns are having a significant impact on the construction industry globally, according to respondents.
Underlying these weaker numbers has been a predictable fall in headcount, profits and new business inquiries. Payment delays have inevitably increased with suggestions from respondents that the costs of materials used in construction have also been rising.
“The feedback to the monitor highlights the challenges construction businesses in North America are likely to face over the coming year with workloads anticipated to be flat at best away from the infrastructure sector and profits remaining under pressure,” said Simon Rubinsohn, chief economist, RICS.
He added, “For the time being, the extent of underbidding is relatively modest both in the US and Canada which is encouraging but whether this can be sustained if the macro recovery continues to falter remains to be seen.”
In the U.S., the Construction Activity Index slipped further into negative territory in Q2 as workloads dropped as a result of the pandemic. The decline was most marked in the area of private non-residential.
Looking ahead, RICS and AACE say this part of the construction sector is likely to remain under pressure, with private residential workloads also struggling to emerge onto a more positive trajectory. In common with many other parts of the world, infrastructure is projected to not only be more resilient but to actually see a return to positive growth, albeit at a slower pace than at year-end 2019.
Key factors holding back activity are, unsurprisingly, lack of demand, financial constraints and regulatory issues. Headcount in construction, which fell in Q2, is now projected to gradually stabilize.
Labor shortages have diminished in importance recently, with just 24% of respondents identifying this as a barrier, compared to 50% previously. Skill shortages are also seen as less of a concern, flagged by 31% of respondents in Q2 compared to 65% in the prior quarter. The area where this is seen as more of a problem is skilled trades: an obstacle identified by 58% this time around, compared to 41% in Q1.
For comments, questions or concerns, please contact Paul Bubny
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