Construction Sector in Wales Braces for Growth in 2025 Despite Persistent Challenges
The latest RICS Construction Monitor Q4 2024 for Wales reveals a mixed picture for the construction industry, with workloads remaining stagnant in the final quarter of 2024 but optimism growing for a rebound in activity over the coming year. Despite ongoing challenges such as skills shortages and tight profit margins, surveyors across Wales are anticipating a rise in construction activity during 2025.
Workloads Flat in Q4 2024, but Public Housing Shines
The report shows that overall construction workloads in Wales remained broadly flat in the final quarter of 2024, with a net balance of just 3% of surveyors reporting an increase in activity. This marks a decline from the 13% growth reported in the previous quarter.
Public housing emerged as the strongest-performing subsector, with a net balance of 16% of surveyors reporting increased activity. Infrastructure also saw modest growth, with a net balance of 3%. However, other sectors struggled, with private housing, private industrial, private commercial, and other public works all reporting declines in activity.
Optimism for 2025
Despite the sluggish end to 2024, surveyors in Wales remain optimistic about the year ahead. A net balance of 16% of respondents expect workloads to increase over the next 12 months. While this represents a slight moderation from the 26% reported in Q3 2024, it marks the fourth consecutive quarter of positive expectations for future activity.
Anthony Davies of Davies Consult in Machynlleth noted, “A lack of land availability is blocking housing development, and a shortage of skilled workers is driving up prices and delaying works. However, there is a sense that these challenges could ease slightly in the coming year, which is driving optimism.”
Skills Shortages Worsen
One of the most pressing issues facing the Welsh construction sector is the worsening skills shortage. According to the report, 65% of surveyors reported a shortage of quantity surveyors, up from 50% in Q3. Similarly, 50% noted a shortfall in other construction professionals, and 66% reported a deficit in bricklayers, up from 59% in the previous quarter.
Neil Taylor of Hafod Housing Association in South Wales commented, “The planning process continues to be challenging, as is maintaining quality standards on site. This is due to the lack of suitably qualified trades, which is a significant barrier to growth.”
Profit Margins Under Pressure
While workloads are expected to rise, profit margins are likely to remain under pressure. A net balance of -5% of surveyors anticipate a decline in profit margins over the next 12 months. However, this is the least negative outlook since 2020, suggesting some improvement in financial conditions.
UK-Wide Challenges
The challenges faced by the Welsh construction sector mirror those across the UK. RICS Chief Economist Simon Rubinsohn highlighted the importance of addressing planning barriers and labour shortages to meet the government’s ambitious construction goals.
“Although the overall tone of the latest RICS Construction Monitor is a little subdued, the more positive assessment of the outlook foreshadows some of the announcements made by the Chancellor in her recent speech,” Rubinsohn said. “However, respondents continue to emphasise the need to address planning regime barriers and labour shortages to deliver on these goals.”
Looking Ahead
As Wales heads into 2025, the construction sector is poised for growth, driven by strong demand in public housing and infrastructure. However, the industry must navigate persistent challenges, including skills shortages and tight profit margins, to fully capitalise on the anticipated increase in activity.
For now, surveyors remain cautiously optimistic, hoping that government initiatives and improved market conditions will help unlock the sector’s potential in the year ahead.
