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UK construction falters in the face of Ukraine crisis and rising inflation

UK construction falters in the face of Ukraine crisis and rising inflation

Economic growth in the UK has slowed due to rising inflation and the economic implications of Russia’s invasion of Ukraine. The construction industry and economic confidence are deeply intertwined, so it’s no wonder that the UK’s architects and engineers are feeling the squeeze.

According to reports from the latest RIBA Future Trends survey, architects in London saw their expectations for future workloads drop by 18 points to 22+ earlier this year, immediately after reporting a recovery in confidence levels after the pandemic. Nationally, the index dropped by four points to an average of 19+.

Why has confidence dropped?

The UK economy grew by 0.1% in February, a slight slump since 0.8% growth in the New Year. Forecasts suggest more worrying figures to come, with the IMF scaling its growth projections for the UK by one entire percentage point, from 4.7% to 3.7%. This is due to inflation eating into disposable income, whether it be as a result of the post-pandemic squeeze or the energy crisis.

Head of Economic Research and Analysis at RIBA, Adrian Malleson, chalks up the fall in confidence at architecture studios to these economic conditions. In a recent interview, he commented, “[This study] shows that cost pressures on architects, clients, contractors, and product manufacturers show no signs of easing. Rising energy and commodity prices, along with global supply chain disruption, have led to the price of building materials rising by around 20% over the last year.”

It was also suggested that some clients, especially those in the small residential sector, may have begun to make layoffs in the wake of the cost of living crisis. Reports of stalled or abandoned projects from smaller practices tend to involve residential developments or renovations, which supports the hypothesis that a lack of disposable income is affecting architects. Malleson questioned, “Are clients thinking twice before embarking on home renovations amid a growing cost of living crisis?” and it seems that the answer is yes.

Hope on the horizon for construction

Despite the dip in confidence, expectations for workloads were still outstripping September, with a third of firms forecasting an increase. Meanwhile, 59% thought they would stay the same and only 11% anticipated a decline. This dip in confidence was reflected for every type of project, with both the private housing and commercial sectors both taking a six-point hit.

Although confidence in London suffered the largest drop, other regions’ outlooks were more optimistic. Wales and the West of England reported a two-point rise to +24 while the South saw confidence creep up by a point. The Midlands and East Anglia, an otherwise slow region, also saw improvement. Their confidence rose by two points to +5.

Nationally, workloads have increased by 4% compared to this time last year and permanent staff numbers are up by 2%. Although there are certainly challenges ahead for the sector, perhaps it’s not all doom and gloom for architects in the UK.

 

 

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