Tag: Glenigan Construction Review

Glenigan Announces its Review of Construction in 2022

A new annual report explores how the significant disruption of last year is setting the market mood of the construction sector in 2023.

Today, Glenigan, one of the construction industry’s leading insight and intelligence experts, releases its 2022 Construction Performance Review.

Providing a topline overview of UK construction sector activity over the past 12 months, this report evaluates overall output whilst offering insight into how this will influence the market in 2023.

Figures presented are drawn from Glenigan’s own data, combining both major (> £100m) and underlying (<£100m) projects, complemented with information from other official sources, including ONS figures.

The key takeaway from the Review is the staggering inflation in construction materials costs, which had been gathering momentum since January 2021 to peak at a massive 26.8% in Q.2 2022. Whilst currently figures have settled at around 15%, ongoing international geopolitical events and domestic socioeconomic disruption indicates market volatility and, possibly, another inflation spike in the first half of 2023.

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Looking at specific materials categories, energy intensive products were hit hardest, with the price of aggregates and insulation rising an eye-watering 53% and 32% respectively. More barriers to imports post-Brexit and rocketing power prices can be seen as the key reasons for these dramatic rises, and will put considerable pressure on contractors already working to extremely tight margins.

Labour and Wait

The construction sector also felt the pinch in terms of labour supply, which intensified over the course of 2022. Alongside legacy issues, such as a shallow recruitment pool and a greying workforce, Brexit and the Pandemic has resulted in less ready access to EU workers.

Looking at the figures as they stand at the start of the year, whilst there are currently 2.14 million employed in the sector, this number still languishes almost 7% below pre-Pandemic levels and 2.4% on a year ago. Couple this with 49,000 construction vacancies and there’s a shortfall with the very-real potential to stifle 2023 activity. This might put a serious dent in the current Government’s ambitious infrastructure and levelling-up plans in the short-term.

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Projected Performance

Despite material and labour pressures, output actually rose in 2022 by 6% compared to the previous year. Most significant was a 52% leap in industrial new build and 11% registered for private residential new build activity.

However, tempering any optimism for a speedy recovery, a drop in the number of projects starting on site last year points to a weakening in construction output in 2023.

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2022 saw a significant slowdown in projects progressing to work on site, as contractors and clients have reappraised the design and cost of build, largely prompted by price inflation and regulatory changes.

For example, many housing developers pushed back start dates in Q.3 2022, following the introduction of Part L of the Building Code. Overall this has led to a 50% increase in the time it takes from planning approval to commencing on site.

Furthermore, the value of underlying project starts also declined by 5% in the second half of 2022, compared with the same period a year ago. This was reflected in a 5% dip in the value of underlying planning consents during the same period and a concerning 14% drop in the number of projects securing planning consent.

Looking Ahead

Commenting on 2022 performance, and how it relates to the year ahead, Glenigan’s Economic Director, Allan Wilen, says: “The construction sector has already been buffeted by strong headwinds in the second half of 2022, and these look to become more forceful in 2023.

“The cautious optimism and tentative performance increase this time last year has been washed away by events out of the sector’s control, and many businesses will be battening down the hatches and hedging their bets for a potential, if modest, uplift in the latter half of the year.

“Whilst supply side pressures may ease, the skills shortage is a persistent problem which the industry will urgently need to tackle if it wants to return to pre-Pandemic output levels. However, there are a few bright spots in the gloom, with major projects including HS2 driving activity, as well as an increased focus on other critical infrastructure in energy, healthcare and data centre developments.

“Whilst next year will remain depressed, with a 2% decrease in the overall value of underlying project starts, Glenigan predicts a 6% increase in 2024, setting construction back on the road to recovery.”

To read the full 2022 Construction Performance Review Report, containing deeper analysis of the above, click here.

2023 sees Glenigan celebrate its 50th anniversary, commemorating half a century of delivering the highest-quality construction market intelligence.

To find out more about its services and expertise click here.

Planning Consents and Contract Awards uptick offsets decline in starts

Glenigan Construction Review

  • Overall value of project starts during the three months to October declined 29% against preceding 3 months
  • Main contracts awarded rose by 4% in value against the previous three months, up 32% on a year ago
  • Planning consents edged 2% higher against the preceding three months in 2021
  • Underlying civil engineering work starts fell 32% compared with the previous three months to October 2021, 43% down on 2020
  • Underlying industrial project starts increase 41% against the preceding three months in 2021, also standing 38% higher than a year earlier
  • London was the strongest performing part of the country for underlying projects, with starts rising 2% during the three months to October 2021

Today Glenigan, the construction industry’s leading insight and intelligence experts, release the November edition of its Construction Review.

This monthly report provides a detailed, comprehensive analysis of construction data, giving built environment and property professionals a unique insight into sector results, from the three months to the end of October 2021.

A significant takeaway from November’s figures is, whilst the decline in project starts continues to affect the sector, an uptick in approvals and contract awards demonstrates a degree of resilience.

Failure to Launch

Against the context of global skills shortages and persistent supply chain issues, inevitably the overall value of project starts during the three months to October declined.

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This represented a 29% drop overall against the preceding three months to October 2021 and was 17% lower than the same period last year.

A softening in underlying work (< £100 million) (16%) and a sharp decline in major projects (> £100 million) down a massive 50% on the preceding three months this year supports the wider acknowledgement of a temporary autumn slump, following a summer of intense activity.

Reasons for Optimism

Supporting Glenigan’s predictions this downturn in project starts is a short-term challenge, an increase in detailed planning approvals and main contract awards highlights a healthy pipeline of future work in 2022 and beyond.

This emphasises the predictions found in Glenigan’s most recent industry Forecast (November 2021) which predicts sector-wide growth next year, despite the current disruption battles.

Analysing the data further, the value of main contracts awarded rose by 4% against the previous three months and was 32% up on a year ago.

Major contract awards rallied, following relatively poor performance between July – September. Although still lower compared to the three months to July (-8%), awards were up 20% compared to 2020.

Planning consents edged 2% higher against the preceding three months but were unchanged on a year ago. Nevertheless, approvals were 17% above the same period in 2019.

On-site activity remains stable

According to the latest official ONS data, the value of work carried out on-site picked up in September, having weakened in the previous two months. Again, external, global events had a major role to play. Likely, the recent energy and fuel crises will have only exacerbated the situation. This slight increase was not enough to prevent a 1.5% slip against the preceding three months, but was up 9.7% on 2020.

Looking to the sector split, residential new work fell back during the period coverage in this Review, with private and social housing falling by 3.5%.

Public non-residential and commercial output also declined, dropping by 12.8% and 5% respectively against the preceding three months.

Sector Focus

A general decline in underlying starts persisted across almost all sector verticals.

Underlying civil engineering work starts saw a fall of almost a third (-32%) compared with the previous three months to October, and were 43% down on a year earlier. This was highlighted through poor underlying infrastructure performance, 42% lower than a year ago. Utilities were also 45% lower.

Residential, retail, hotel & leisure, health and education also witnessed a decline in performance in the three months to October. For underlying residential, it was also 22% down on the same period last year.

Standing out from the crowd, underlying industrial project starts proved a pillar of strength, increasing 41% against the preceding three months as well as standing 38% higher than a year earlier.

Underlying office starts were also high, climbing 8% against the preceding three-month period to October, 23% higher than a year ago.

Likely these spikes are caused by a significant increase in ‘mission critical’ projects coming online and an even greater push from employers to get staff back into the formal workplace.

Regional Performance

London was the strongest performing part of the country for underlying project-starts, with starts rising 2% during the three months to October to stand 28% up on a year ago. Similar to previous reviews, the North West was the only other region to see an increase in underlying starts against the preceding three months (+3%) with starts also up 9% on a year ago.

Underlying starts continued to fall across the rest of the nation, with Wales performing particularly poorly, with value plummeting 51% against the preceding three months to stand 74% down on a year ago.

Commenting on the findings, Glenigan’s Economic Director, Allan Wilen says, “Tough times continue as disruptive global events continue to hit hard, however a gradual increase in contract awards and planning consents indicate momentum will soon start to revive.

“Of course, ready availability of personnel and material when shovels need to go into the ground will determine how long the slump in starts persists.

“Once again, there’s massive regional inconsistency, with only two parts of the country seeing an increase in activity. This will no doubt become a priority for the new LUHC Secretary, who will need to strike a balance across the nation to deliver on the government’s much trailed levelling-up agenda.”

To find out more about Glenigan, its expert insight and leading market analysis click here.