Confidence in the Yorkshire & Humber construction sector is tempered by funding and skills concerns, according to the latest Construction Market Intelligence from Yorkshire-based construction and property management consultant Rider Levett Bucknall.
Major developments including Sheffield Policy Campus and West Yorkshire Mass Transit are driving demand across a range of sectors and underpinning confidence in the region’s medium to long-term outlook.
Placemaking is now more prevalent in development opportunities in the region with the new emphasis on living and working within city centres. The demand for flexible, high-quality commercial spaces is still strong as hybrid working remains the norm.
The region’s confidence is being tempered by budget constraints across the public sector and the lack of clarity over the new government’s spending priorities. Labour shortages have continued to add pressure to wage inflation and construction costs, affecting project viability.
Contractors are cautious and their reluctance to take on uncertain commercial risk is a key feature of contract negotiations. This is both slowing progress and further inflating construction costs across the supply chain as contractors strive to maintain a reduced risk profile, says the company.
There has been minimal change in overall pricing levels since the last quarter with the general election dampening new opportunities, and material inflation having settled and reduced in areas. The key challenge remains the labour shortage and the impact this continues to have on labour price inflation.
There is cautious optimism among contractors over their future pipeline of work, but the long-term outlook on tender prices is hard to call until there is clarity on the spending priorities of the new government and given the backdrop of economic uncertainty.
- Steel prices continue to fall while other commodities remain relatively stable, which is reflected in the mixed picture we are seeing.in material prices.
- Material prices have fallen slightly overall with the biggest drops in plywood and reinforcement bar. Metal doors and windows have continued to increase in price.
- Due to the skills shortage in construction, labour prices continue to increase generally adding further pressure to the viability of projects. Facade contractors are in particular high demand.
Chris Shaw, Senior Associate for RLB Yorkshire, said: “Leeds and Sheffield are strong economies with the residential sector remaining key to their continued growth, which can be seen in the number of ongoing and new projects coming to the market. This is especially evident in Leeds which is currently ranked in first place in the country for new housing planning applications and transactions.
“Short-term, there is prospect of some caution and headwinds while the new government sets out its priorities and spending commitments for the future. However, we are hopeful that they can develop a long-term strategy for the country that filters through into a more stable plan for the construction sector.”
