UK construction activity tumbles as Iran war pushes up costs, RICS survey shows

LONDON, May 7 (Reuters) - Activity in Britain's construction ​sector ⁠shrank at the strongest pace ​in almost six years in the three months to March, according to a ​survey ‌on Thursday that also showed the war in Iran had increased ⁠firms' costs.

The Royal Institution of Chartered Surveyors said ⁠the industry's net workloads balance ​dropped to -12% in the first quarter, down from -6% in the previous quarter. Thursday's reading was the weakest since the three months to ​June 2020 ‌when it dropped to -36 as building sites were closed due to the COVID-19 lockdown.

"The impact of the war in the Middle East is clearly visible in the Q1 RICS Construction Monitor. ​Rising material costs, a tougher credit environment and increased pressure on ‌margins are already leading some developers to slow construction activity," RICS Chief Economist Simon Rubinsohn said.

The survey ‌also showed:

* War in Iran as well as concerns about oil prices and material costs weighed on sentiment

* Business' profit margin ​expectations dropped sharply to -27, weakest since Q4 2022

* Construction costs expected to ‌rise by 6.6% over the next 12 months, materials costs projected to jump by 7.5%

* Companies in the private sector are scaling ⁠back ⁠plans for the coming year

* Expectations for house-building ‌are now flat as firms worry about impact of planning changes

* A net ​balance of +8 ​firms expect to increase hiring compared to +14 in ‌the previous quarter

* Infrastructure only bright spot, although momentum is fading

* The quarterly survey was based on responses from 938 firms (Reporting by Suban Abdulla; editing by David Milliken)