Architects expect the sector to contract for the first time in more than two years, new figures from RIBA reveal as the Bank of England warns that the UK may have entered a recession.
RIBA’s recent Futures Trends survey found that practices expect workloads to shrink over the next three months for the first time since June 2020, in the midst of the first coronavirus shutdown.
The August index fell 12 points to -8 after five months of instability in the sector due to rising inflation, rising energy costs and economic uncertainty. Any indicator number less than zero means that respondents expect workloads to decrease.
This comes after the Bank of England moved yesterday to raise interest rates from 1.75% to 2.25%, the highest level in 14 years, in an attempt to curb inflation.
The central bank also said it believed the economy contracted by 0.1% between July and September, having previously forecast growth during this period. The same rate of contraction was recorded between April and June.
This means that the UK may now be in a recession, which is defined as two consecutive quarters of contraction.
All four sectors surveyed by RIBA practices are expected to see a decline in employment over the next three months, despite a slight dip in expectations for the community sector from -10 to -6.
Private housing, which has always been the sector with the most boom since the start of the pandemic, fell into negative territory for the first time since June 2020 with a score of -9.
The commercial sector fell by three points to -2, while the public sector fell by the same amount to -9.
Pessimism deepened across the board, with workload forecasts in Wales and the West dropping 37 points in one month to -22.
The Midlands and East Anglia each fell by 10 points to zero, while the South of England fell by nine points to -12 and London fell by one point to -7.
Only the north of England expects action to increase, although the region’s index slipped seven points from +13 to +6.
Rising inflation and rising energy costs are “obviously weighing on the minds of architects,” said RIBA’s head of research and economic analysis, Adrian Mallison.
He added, “With reports of bloated construction products, supply chain difficulties, unexpected project costs, and limited contractor and trade person availability, many projects are affected.
“In fact, reports indicate that persistent delays in the planning process are also preventing timely delivery of projects – applications that once took weeks are now taking months, with delays across regions and project types.”