A net balance of -4% of Scottish respondents said that workloads fell in Q2, compared to the UK average of +13% of respondents. Looking at the subsectors, private housing and private industrial works were reported to be in negative territory (-8% and -13% respectively), and public housing, private commercial and infrastructure workloads were reported to fall flat through Q2.

Although surveyors in Scotland are continuing to report labour shortages, the shortages noted in Q2 appear to be less severe than in Q1. Around 56% of surveyors reported a shortage in quantity surveyors, down from 63% in Q1, 54% noted a fall in construction professionals compared to 61% in Q1 and 47% reported a shortage in bricklayers which is the lowest this figure has been since the beginning of 2021.

In line with the ongoing fall in workloads, surveyors are less optimistic about the 12 months ahead than they were and expect workloads to be broadly flat over the year ahead. The net balance is -1%, compared to +12% in the previous quarter.

Labour shortages and material cost pressures may be weighing on profit margin expectations over the next year, with surveyors anticipating margins to be squeezed. A net balance of -15% of surveyors expect profit margins to decline over the next year. Although this is the eighth consecutive quarter that this figure has been in negative territory, surveyors appear less pessimistic than in the latter half of 2022, when the figures were -26% and -40% in Q3 and Q4 respectively.

Lorna White from RJT Excavations Ltd in Edinburgh said: “There are major problems with new projects on hold due to budget constraints and with the impact of material prices.”

Thomas Hamilton of Robertson Central West in Glasgow added: “Material price increases and labour shortages are driving up construction costs.”

Kevin Robertson of K R Developments Group Ltd in Edinburgh commented: “Higher interest rates are impacting on project viability and construction costs.”

Commenting on the UK picture, RICS chief economist, Simon Rubinsohn, said: “Feedback to the Q2 survey shows the rising trend in base rates is leading to increased financial pressures in the construction industry. This is not anticipated to lessen any time soon and is also reflected in the cautious assessment regarding the outlook for profitability.

“However, there are some signs of an easing in the extent of skill shortages which is accompanying the flatter trend in activity. Infrastructure numbers remain solid, but the survey provides further evidence of the challenges in delivering residential developments at the current time.”