Long-term stability in the construction industry could be hampered by high energy prices and future prime ministerial changes, chartered surveyors warned yesterday.

A report released by the Royal Institution of Chartered Surveyors found that buoyancy in the sector was still high, with 21 per cent more chartered surveyors reporting a rise in workloads than a fall in the last quarter.

The figure is down slightly on the second quarter of 2006 but still above comparable data for the same period last year, RICS noted.

The strongest activity was within commercial and private housing, with Scotland and Wales seeing the fastest expansion in workloads.

Optimism in the sector had been boosted by a strong economy and booming housing and commercial property markets, analysts said. In addition, the influx of migrant labour from Eastern and Central Europe had eased skill shortages, the report indicated.

But confidence in profit outlook over the next year has fallen.

Chartered surveyors cited high energy and raw material prices and nervousness about Tony Blair's exit strategy and its effect on the economy as causes for concern. Milan Khatri, chief economist at RICS, said: "The immediate outlook for the construction industry is bright as a healthy economic outlook continues to boost workloads.

"However, interest rates are set to rise further and will cool the property market in 2007. As such, we foresee a market slowdown in the construction industry."

He added: "If the Government goes ahead with its proposals for Planning Gains Supplement there is a risk that small developers will be driven out and first-time buyers will feel the knock-on effect as the property market creates another brick wall."

However, the RICS said that confidence remains firm in the West Midlands for both workloads and employment levels.

Growth in public house building picked up at the fastest rate for 12 months, while private housing continued at the steady pace seen during previous quarter. In the private commercial sector, growth almost halved but the pace still remains around the long running average for this sector.

Peter Lakin, RICS West Midlands spokesperson and a partner at EC Harris, said: "Demand for contractors'

services is continuing to increase, and order books look very healthy, driven by government initiatives, particularly in health and education.

"If the industry is worried, it is concerned that perceived frailties in the economy could lead to cuts in public spending on health, while further interest rate rises may hit private housing and reduce consumer confidence."