Fresh warning sign for construction industry

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New construction activity has fallen back into contraction, according to figures released by industry analysts Glenigan. 

The value of new projects starting on site* was 4% lower than a year earlier during the three months to November. Housing, non-residential and civil engineering starts were all scarcer during the period compared to this time last year.

The amount of new commercial and industrial work was flat on a year earlier during the latest period. Growth in the industrial and hotel and leisure sectors offset falling starts of both office and retail schemes.

Commenting on this month’s figures, Allan Wilén, Glenigan’s Economics Director, said: “The latest evidence on commercial construction starts is disappointing given the continued strength of the economic backdrop.”

“However the forward pipeline is much more positive. In the office sector, for example, the value of work achieving planning approval has risen by more than 50% during the last three months.”

Less surprisingly, the public sector is continuing to hold back growth. The value of the health sector is forecast to fall by a quarter during the course of 2015 alone: during the latest three months starts were almost 50% down on a year earlier. The education sector is also in decline. Despite schools funding overall being ring-fenced, government capital programmes do not seem to be making a huge impact on the ground.

Private housing activity grew modestly, up 2% on a year ago. This rise was more than offset by the drag from the social housing sector, where starts were 9% down on a year ago. The sector is bracing itself for three years of reductions in rents. Plans for increased support of housebuilding have been aimed squarely at increasing home ownership, bringing little relief for the rented accommodation model championed by Housing Associations.

According to Mr Wilén: “The Chancellor’s Autumn Statement pledges on housing appear to be a further boon to the private housing sector. In the short term, activity may undergo a pause as developers assess how best to reap the potential rewards.”

The civil engineering sector also saw an 8% annual decline in starts, as growth in utilities work was unable to offset contracting infrastructure starts.

Most parts of the UK have been dragged backwards by weakening commercial and public sector construction. Northern England and the Midlands have led growth through 2015. However only West Midlands and the North East have stayed in the black; the North West, Yorkshire and the Humber and the East Midlands have all moved into decline in the latest figures.

London and the South East, by contrast, have returned to growth after being hit especially hard by an election hiatus and the slowing in the housing market earlier this year.

No such change in fortunes for the UK’s other constituent nations: Scotland, Wales and Northern Ireland have all failed to record growth since March 2015.

*All figures included in this release exclude projects valued at over £100 million, in order to present clearer time-series trends. For further detail on the statistics see Note to editors below.