A slowing housing market has hit the UK construction industry, making it even more unlikely that the Government will reach its housing targets, says the recently published RICS UK Construction Market Survey.

Growth in construction workloads fell to the lowest level for more than a decade as house builders and businesses were hit by the effects of the credit crunch and demand for housing fell away. Workloads fell to the worst level since 1996 with 1 percent more Chartered Surveyors reporting a rise than a fall, down from 16 percent in the fourth quarter of 2007.

The worst hit sector was private housing with workload growth in this sector turning negative for the first time since 1999. The fall is due mainly to a downturn in the North, but private housing weakened in all regions and is now static in London and the South East, Wales, the Midlands and Northern Ireland. 9 percent more Chartered Surveyors reported a fall than a rise in private sector housing workloads down from the positive figure of 16 percent.

Expectations for profit margins fell for only the second time in the survey’s history with surveyor sentiment falling sharply as growth in the private commercial and private housing sectors slowed. Equally, confidence that workloads will increase has fallen for the fifth consecutive quarter, falling below the survey’s long run average.

However, skill shortages have equalled the record low set in 2006 as the industry continues to employ labour from EU accession countries. The UK’s open and flexible labour market continues to provide a firm base for the industry.

RICS senior economist David Stubbs said: “Growth in the construction industry has slowed abruptly in the first quarter of this year. Private residential workloads are now shrinking as home builders react to challenging conditions in the housing market by reducing the number of new homes under construction. This emphasizes the difficulty that the Government will have in encouraging higher house building levels during periods when the housing market is soft.

Although they grew slightly, private commercial workload growth has slowed rapidly as the downturn in commercial property prices and the looming oversupply in the pipeline, forces developers to shelve plans for future construction. We think it is likely that the combination of reduced building activity in private housing and private commercial sectors will act as a major drag on the construction industry over the balance of this year.”