Glenigan – The NEN – North Edinburgh News

Glenigan review shows major projects are propping up UK construction

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

The Review focuses on the three months to the end of October 2022, covering all major (>£100M) and underlying (<£100M) projects, with all underlying figures seasonally adjusted.

It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data.

The key takeaway of the November Review is a softening in the downward trajectory of project-starts registered throughout the second half of 2022. However, this brief period of respite should be approached with caution as geopolitical turmoil persists in Eastern Europe, material and energy costs soar, and the UK enters a recession.

Whilst the sector overall experienced relative stability in the three months to October, with project start levels remaining largely unchanged, figures were still down 4% against the previous year.

Underlying Issues

Major project starts performed well, helping to maintain sector-wide stability, rising an impressive 28% on the preceding three months to stand 19% up on a year ago.

The same could not be said for underlying project starts, which plummeted 17% against the previous three months and were 13% down on 2021 levels.

Overall main contract awards slipped back 7% against the preceding three months, 5% lower than a year ago. Although major projects performed well, growing almost a quarter (24%) on 2021 levels and up by a fifth on the three months to October, underlying projects declined by 13% against last year and 15% compared to the previous three months.

Despite the November Review’s generally sluggish outlook, there are indications of gradual recovery, with a pipeline of work starting to flow following almost six months of blockage. Refreshingly, detailed planning approvals were up 29% against the preceding three months and a nifty 22% higher than 2021 levels.

Major projects rose a stunning 99% compared to the previous three months and an even more monumental 126% up on last year’s figures. Underlying approvals dipped a modest 2% on 2021 but, encouragingly, increased 8% on the preceding three months.

Commenting on the results, Glenigan’s Economic Director, Allan Wilen, says, “UK construction continues to be buffeted by myriad external headwinds, many of which are entirely out of the industry’s control. However, it was encouraging to see a significant uplift in major projects over the period covered by the Review.

“Of course, the release of the November Review comes in the wake of The Chancellor’s sober Autumn Statement, which will no doubt have an effect on future iterations of this report. Significantly, as part of his drive for growth, Hunt outlined the largest public works package for 40 years and substantial funding for critical infrastructure, which will no doubt provide the shot in the arm many contractors have been looking for. Furthermore, the commitment to reduce built environment emissions by 15% by 2030 will provide plenty of opportunities for retrofit specialists.

“No doubt many housebuilders and developers will feel let down, particularly as the one significant point around the ending of Stamp Duty relief will no doubt disincentivise potential buyers in the second half of 2023.”

The Sector specific and regional Index, which measures underlying project performance, was characterised by a bottoming out of project-start levels. However, recent events have dented market confidence, meaning levels remain relatively depressed.

Sector Analysis – Residential

The value of residential work starting on site fell 21% against the preceding three month period to stand 10% lower than a year ago.

Drilling down into the figures, social housing project starts fell a substantial 26% on 2021 levels, yet fared less poorly against the previous three months to the end of October, only dipping 7%. This was a relatively good performance compared to other verticals.

In contrast, private housing dropped 24% compared to the preceding 3 months but only 6% against 2021 levels.

Sector Analysis – Non Residential

Bright spots were few and far between, however, office project starts experienced a good period, rising 11% against the preceding three month period to remain unchanged on a year ago. Industrial starts also experienced modest growth during the Review period, but remained 15% behind 2021 figures.

Hotel and leisure experienced the sharpest decline of any vertical (-38%) against the previous year, also slipping back 19% against the preceding three months.

Education (-24%) and health (-41%) fared little better in the three months to the end of October, respectively crashing 28% and 31% compared to 2021.

Utilities construction starts were the only ones to experience growth on last year (+14%), despite tumbling 15% against the previous three months. Looking at the wider civils landscape, work starting on site slipped back 13% against the previous three months to remain largely unchanged on a year ago.

Regional Performance

Regional performance was generally weak.

Once again, Northern Ireland posted the most positive results, increasing 16% against the preceding three months, to stand an impressive 35% higher than a year ago.

Scotland also had reasons to be cheerful, with starts 10% up on 2021 and 19% up on the preceding three months.

Whilst project starts in Wales advanced on a year ago (+25%), they slipped back 5% on the preceding three months. The North West performed relatively well compared with other regions and, whilst project-starts remained unchanged on the previous three months, they dipped 2% against the previous year.

All other regions experience a decline against the preceding three months and previous year.

To find out more about Glenigan click here.

Glenigan forecasts weak construction output as UK economy haemorrhages

Glenigan’s autumn 2022-2024 Construction Forecast indicates poor market conditions are stifling construction activity, predicting a return to growth by 2024

Glenigan, one of the construction industry’s leading insight and intelligence experts, has released its widely anticipated autumn UK Construction Industry Forecast 2023-2024.

The key takeaway from this Forecast, which focuses on the next two years (2023-2024), is that the construction industry will struggle in the face of extremely challenging economic conditions, with predicted growth in decline during 2022 (-2%) and 2023 (-2%).

However, the sunnier uplands, although far off in the distance, are starting to emerge on the horizon, with a 6% increase predicted in 2024.

The slower road to recovery

Post-pandemic project-starts recovery has lost considerable momentum during the second half of 2022. Forecast to slip back by 2% by the end of the year, and in 2023, it paints a dim picture of activity levels in the short term.

Glenigan predicts the next 24 months to be a challenging period for the construction industry, with ongoing material, labour, and energy supply chain disruption continuing to hold back activity for the foreseeable future.

These external events have resulted in rocketing inflation, rising interest rates, and stalled economic growth, affecting the pipeline of future work. This has been further compounded by the promise of higher tax, utility bills, and rising mortgage costs which has constrained consumer-related construction, including private housing, retail, and hotel and leisure.

The situation has prompted some clients, contractors and developers to pause or scale back on planned investments, further stagnating output. This was confirmed by the value of projects securing detailed planning consent during the first nine months of 2022 dropping by 5%, and main contract awards falling by 8% against the same period in 2021.

Resurgence in private residential construction

Housing market activity cooled-off in 2022, and is predicted to slow further in 2023 as developers respond to weakening market conditions.

Project-starts are forecast to drop 4% this year, with a further 5% decline next, as lower household incomes, higher mortgage rates and lack of affordable homes continues to afflict the wider housing market.

The reduction in stamp duty rates announced in the mini-Budget will provide a small benefit to first time buyers. However, the end of the government’s Help to Buy scheme has removed direct support for new builds, coupled with mortgage providers significantly raising rates in reaction to the current rate of inflation, meaning that any benefit for first time buyers will be negated for the foreseeable future.

Nevertheless, the growing prospect of a stabilising economy in 2023, prompted by a changing of the guard at Number 10, and gradually improving consumer confidence over the next two years supports a forecast of a respectable 15% rise in residential project-starts during 2024.

Social housing slips back

In the public sector, the social housing project-starts prediction is less positive, forecast to slip back during 2022 and 2023, following a rapid 16% recovery in 2021 as housing associations pressed on with schemes delayed during the pandemic.

Despite improved funding, increased construction costs appear to be significantly constraining development activity, with approvals similarly falling back over the past 12 months.

Industrial Consolidation

Industrial project-starts have enjoyed a strong rebound post-pandemic, a rise which has largely been driven by logistics and light industrial projects as significant growth areas. Looking forward, the sector faces a period of consolidation during 2023 and 2024 as the recent spurt in activity inevitably slows.

Weak domestic and overseas demand is expected to temper manufacturing investment in facilities, but warehousing and logistics premises are forecast to remain a growth area. This is due largely to a long-term shift towards online retailing, resulting in continued demand for logistics space, and accounting for the majority of industrial project-starts’ 25% growth in 2022.

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Retail tails-off

In the short term, however, the demand for both logistics and retail space is expected to be damped by weak retail sales as consumer confidence falls in response to higher inflation and falling earnings.

An overhang of empty retail premises, weak consumer spending, and the growth in online sales’ market share is predicted to constrain retail construction starts over the forecast period.

Despite this, investment by discount supermarkets Aldi and Lidl are set to be a bright spot within the sector over the forecast period.

Back to the office

Office starts have also bounced back sharply since 2021, increasing by 27%. The Covid-19 pandemic radically altered working trends globally as many businesses shifted to hybrid working, reducing overall floorspace requirements.

Despite this, the sector is predicted to benefit over the forecast period from a rise in refurbishment projects as tenants and landlords adapt premises to further accommodate these changing work patterns. Conversely, new build office projects are likely to be slower to recover as developers continue to assess the long-term demand for additional office accommodation.

Work, rest and delay

The squeeze on household budgets is set to curb consumers’ discretionary spending in the hospitality and leisure industries. The hospitality sector is still recovering from operational restrictions during Lockdown, as well as reduced revenues due to fewer overseas visitors.

Combined with spiking energy costs over the last 12 months, as well as a potential fall-off in domestic custom over 2023, the hospitality sector will be under considerable pressure. This is predicted to result in retrenchment, causing further delays to project-starts as asset owners wait for confidence to return.

Investment bolsters public sector

A core pillar of the Government’s UK Growth Strategy, public sector investment was set to be an important driver of construction activity over the forecast period. Funding for rail projects and regulated utilities in particular have been tipped to provide the bulk of the output over the forecast period.

However, as a new administration begins, with an ambition to balance the public finance books, planned capital funding allocation may be vulnerable, with a potential range of departmental cuts on the horizon to protect the economy against a looming recession.

Securing our energy infrastructure

Energy security will no doubt remain a national priority following the sharp rises in energy prices over the course of 2022, and an over-dependence on gas-powered electricity. This is expected to drive investment in offshore wind farms, solar PV, increasing our nuclear capacity and strengthening nascent hydrogen capture capabilities.

Building for future generations

The Government is also committed to rebuilding 500 schools over the coming decade. The latest Spending Review includes additional capital funding for the Department of Education, in a move to tackle the shortage of secondary school places. This is expected to support growth in school building projects in 2023 after a weak performance over the last year.

Healthier predictions

Positively, health sector project-starts remained high during both 2021 and 2022, with an optimistic outlook for the future as a 3.8% real-term growth rate in NHS capital funding is set to maintain project-starts at a high level over the forecast period.

Whilst starts are forecast to slip back 6% in 2023, the value of work started during 2021 and 2022 remains above pre-pandemic levels.

Commenting on the Forecast, Glenigan’s economic director Allan Wilen says, “Construction will face a challenging environment in the coming year as the Russia-Ukraine war continues to hinder the UK’s post-Covid recovery, exacerbating supply chain disruption, resulting in materials and energy shortages, and leading to cost inflation and dented market confidence.

“The pattern of UK construction activity is being reshaped by economic slowdown, but structural changes are expected to create new opportunities in warehouse & logistics, office refurbishment and new housing schemes. Going forward, it will be crucial for firms to be responsive and adaptable in order to mitigate risks in the current marketplace and exploit new opportunities as they emerge over the forecast period.”

To request a copy of Glenigan’s November 2022 Forecast click here.

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

Construction: Gloomy outlook offset by modest pipeline recovery

Overall project starts decline 9% on previous quarter
Major project contract awards and planning approvals up on 2021 figures by 59% and 158% respectively
Civils project starts modestly increase due to a spurt of utilities-related activity

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

This Review focuses on the three months to the end of September 2022, covering all major (>£100m) and underlying (<£100m) projects, with all underlying figures seasonally adjusted.

It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data.

The central finding of the October Review reflects recent, previous iterations, with high materials and energy costs, economic and political chaos and ratcheting building regulations keeping the market depressed for the foreseeable future.

However, whilst project starts dipped once more (-9% against the preceding three months), a modest rise in main contract awards (+3%) and detailed planning approvals (+3%) hint that recovery, although not immediate, is on the horizon.

Glimmers of Hope

The slight growth in the project pipeline can largely be attributed to a jump in major project contract awards, which were up 27% against the preceding three months, 59% higher than a year ago. Equally, major project planning approvals were up an impressive 58% by the end of Q.3, to stand a staggering 158% up on 2021 figures.

However, underlying performance was comparatively week, tempering results, dipping 8% compared the previous three months in contract award terms, 6% down on last year. Despite planning approvals increasing 8% over the past quarter, they remained 10% lower than a year ago.

Once again, major projects saw a respectable rise in work starting on site, climbing by a third in comparison to the preceding three months, however this figure remained 14% lower than the same period in 2021.

Underlying project-start performance was dismal, posting a 27% decline against the preceding three months, 23% down on last year.

Commenting on the results, Glenigan Economics Director, Allan Wilen, says, “The sector has faced considerable amounts of turbulence over the past twelve months. A new Prime Minister, changing of the ministerial guard and wildly fluctuating markets have done nothing to inspire consumer and investor confidence.

“At the time of this Review’s release, we find ourselves in a state of flux, with yet another new premier, however, the pound rallying once again and the promise of economic stability from the autumn financial statement should go some way to calming the choppy waters.

“With activity trickling back into the pipeline, everyone in the sector hopes the flow of awards and approvals picks up once again, even if project starts currently remain stagnant.”

The sector-specific and regional index, which specifically measures underlying project performance, was characterised by overall decline. However, a few bright spots could be seen within an otherwise gloomy picture.

Sector Analysis – Residential

Overall, residential work starting on site fell by a third during Q.3, to sit 24% lower than a year ago.

Private housing performed particularly poorly, plummeting 37%, 20% lower than in 2021. Social housing also fell by 13% and 36% against the same set of criteria.

Sector Analysis – Non-Residential

Sharp decline was the consistent theme across most verticals during Q.3, education and health weakened 37% and 39% respectively against the preceding three months. Both were also down on 2021.

Office project starts fell dramatically, 30% against the preceding quarter and 37% compared to the previous year.

Industrial (-13%) and retail (-14%) experienced relatively small declines against the preceding quarter, but dropped 16% and 27% respectively against last year’s performance scores. Hotel and leisure was 13% up on the preceding three months but down 28% on 2021 levels.

Civils provided a welcome lift in an otherwise disappointing period, increasing 1% on the preceding quarter and over 10% on last year. Particularly, growth can be attributed to a spurt in utilities work starting on site, as well as a relatively steady stream of infrastructure project-starts.

Regional Performance

Once again, Northern Ireland performed well with project-starts increasing 31% against the preceding quarter, standing 51% up on a year ago. Wales also delivered positive results, remaining unchanged on the previous three months, rising 7% on 2021.

Unfortunately, the outlook was decidedly bleaker across the rest of the UK. The North East (-38%), East of England (-36%) and London (-30%) and Scotland (-26%), all slide back on the preceding quarter. London, which has seen a steady decline in activity over 2022, also posted the largest decline against last year, diving 45%.

Wilen concludes, “Sector verticals and the UK regions are feeling the economic pinch and, whilst a few major projects are bolstering results, the underlying figures indicate there’s a massive mountain to climb to stabilise the sector.

“The new Government needs to get a grip of the situation from day one and offer a clear strategy to support UK construction, which currently lacks the rigorous policy from key departments to recover and progress.”

To find out more about Glenigan click here.

Glenigan forecasts Construction Sector return to growth by 2023

Glenigan, one of the construction industry’s leading insight and intelligence experts, has released its UK Construction Industry Forecast 2022-2024.

The key takeaway from this Forecast, which focuses on the next three years (2022-2024) indicates the construction industry will face challenging economic conditions.

However, whilst growth will be stifled in 2022 (-2%), 2023 is predicted to see a modest 8% increase and a smaller 2% lift in 2024, representing an average rise of 2.6% over the Forecast period.

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This report is predominantly focused on underlying starts (< £100m in value), unless otherwise stated, and contains a comprehensive overview of the current state of the construction industry. Crucially, it provides overall sector and vertical-specific insight into performance over the next few years.

Significant disruption stifles short-term growth

The next few years will be challenging for the construction industry as a whole. The war in the Ukraine is creating considerable economic uncertainty which is having a direct, current effect on output, derailing post-COVID recovery. As a result, overall project starts are forecast to slip back 2%.

Aside from this ongoing conflict, current inflation spikes, higher taxes and rising mortgage costs are expected to constrain activity in consumer-related areas, such as private housing, retail and hotel & leisure.

In contrast, a firm development pipeline is predicted to lift industrial and office starts in 2022, as well as Government-funded areas such as education, health and community & amenity.

More positively, the value of project starts is expected to rise in 2023, as the UK economy stabilises and short-term supply chain pressure ease. However the lingering impact of higher construction, material and energy costs means this growth will be significantly lower than predicted in previous forecasts.

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Housing Starts Depressed

Although a buoyant housing marked helped to lift new housebuilding activity in 2021, with starts rising 26%, this recent surge is fading.

Predicted to drop 5% in 2022, following the removal of temporary Stamp Duty relief and dwindling homebuyer confidence, higher taxes and mortgage costs, housebuilders are expected to moderate project starts and focus on building out developments already on-site.

However, this slowdown appears temporary, with a renewed build-for-sale starts recovery anticipated in the second half of the Forecast period, rising 14% in 2023 and 1% in 2024, as household financial positions and UK economic prospects improve. Furthermore, a strong development pipeline has also be registered for Build-to-Rent starts, following a productive 12 months in 2021.

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Bright spots for non-residential work

Industrial starts, particularly warehouse and logistics, are set to remain a growth area, building on the ever-increasing appetite for online retail, which accelerated during the pandemic. With e-commerce expected to be a significant growth market in the coming years, 2022 will see start value increase by 11%.

However, the online shopping boost has hit physical retail hard, with high street and outlet footfall remaining far lower than pre-pandemic levels. Unsurprisingly, lower consumer spending power, an overhang of empty retail premises and a greater share of the market moving online, means growth will be tempered over the Forecast period. Here, increased investment by the deep discount supermarkets, Aldi and Lidl, will be the primary drivers of the predicted 6% average uplift between 2022 and 2024.

The leisure and hospitality sector, hit hard by the pandemic, is also only set to expect modest recovery over the Forecast period due to reduced consumer discretionary spending during a tighter economic climate.

Moving from play to work, office starts bounced back sharply last year (+27%) and are predicted to benefit over the forecast period (av. +11%). This potential growth can be attributed to a rise in refurbishment projects as tenants and landlords adapt premises to accommodate changing working practices. However, new build office projects will likely be slower to recover as tenants and developers assess the effects of the shift towards remote and hybrid working on the long-term demand for office accommodation.

Public Sector Pick-Up

Public sector investment is set to be an important driver for construction activity over the Forecast period. However, the latest Spending Review revealed only modest growth in capital funding for a handful of central Government departments over the next three years.

Whilst the value of social housing starts is set to dip almost 10% this year, following a 15% surge in 2021, the vertical is predicted to rally for the remainder of the Forecast period, helped by a strong pipeline of already approved projects commencing on site.

Education construction is a vertical predicted to grow significantly over the next few years (av. +8%), partly driven by the Government’s commitment to building 500 new schools over the next decade. This is supported by a modest rise in universities capital spending during the second half of the Forecast period

The outlook for the health sector is also brightening. Starts remained high in 2021 post-Pandemic and the increase in capital funding and a growing development pipeline means the value of starts are expected to remain steady over the Forecast period, will slight declines this year (-5%) and next (-6%) .

Focusing on civils and infrastructure, a significant funding increase in areas such as roads, especially to address the maintenance backlog on the nation’s local roads, is helping to lift the value of project starts.

Investment in rail projects and utilities development, as well as ongoing work on major infrastructural projects such as Thames Tideway, HS2 and Hinkley Point are also set to support vertical activity over the Forecast period.

Commenting on the Forecast, Glenigan’s economic director Allan Wilen says, “Circumstances have changed significantly since the November 2021 Forecast and, whilst the short-term picture appears challenging, we should adopt a sanguine approach for the next few years.

“Markets sent into turmoil by the Russia-Ukraine War are starting to stabilise as new supply chain solutions are developed and established.

“Of course, in the near future construction and building product costs will remain high. However this situation will no doubt encourage a burst of imagination and innovation which will see the sector weather the current storm and progress to, if not sunny uplands, then at least towards a trajectory of upward growth.”

To download Glenigan’s UK Construction Industry Forecast 2022-2024 click here.

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

Construction: planning approvals boost offers positive outlook

Planning approvals rise 11% in three months to February, boosting development pipeline
Contract awards for major projects rise 36% in three months to February
Underlying project approvals are up 10% in three months to February, 2% higher than a year ago
Hotel & Leisure is February’s strongest performer, up 23% on preceding three months and 7% on a year ago
Office and retail-starts increase 17% and 11% in the three months to February
North-East bucks the trend to deliver growth both in the preceding three months and previous year

Glenigan, one of the construction industry’s leading insight and intelligence experts, has released the March 2022 edition of its Construction Review.

This Review focuses on the three months to the end of February 2022, covering all projects with a total value of £100 million or less (unless otherwise indicated), with all figures seasonally adjusted.

It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals a unique insight into sector performance over the last 12 months.

Hope on the horizon

The value of underlying and major project^[1] starts on-site experienced sharp declines in the three months to February (-17%), over a quarter lower on 2021 (-26%).

However, a rallying development pipeline should give the sector reasons for cautious optimism.

The value of detailed planning approvals rose by 11% to average £8,991 million against the previous three months. Major project approvals performed strongly against the same period (+26%); and underlying approvals witnessed growth of 10%, standing 2% higher than a year ago.

Despite a modest industry-wide dip in main contract awards (-5%), those for Major projects were up, increasing 36% during the three months to February.

Partially offsetting the abnormally weak start to the year in performance-terms, this boost in planning approval and contract awards sits in line with Glenigan’s most recent Forecast, indicating potential market revival in the second half of 2022

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Output rising

However, a gradual increase in construction activity during the last three months also suggests a sector on the brink of resurgence.

According to the latest ONS figures, overall construction output during the three months to January increased 3% against the preceding three months, up 6.9% higher than a year ago.

Drilling down into these figures, R&M output increased, up 1.4% during the same timeframe and up 5.4% on the previous year. Growth in this area was predominantly driven by a 2.9% rise in non-housing R&M and a 1.1% increase in public housing R&M work.

Within the same time period, new work output also increased 4.0% and 7.9% compared the previous year. A rise in industrial work has been a main driver, growing 11.2% and 30.4% on the year previous.

Private housing and infrastructure also strengthened. Infrastructure output grew 5.2% against the last three months and 30% compared to a year ago. Whilst private housing output increased 3.4%, rising 11.3% on 2021 figures.

Finally, commercial output rose 5.2% against the preceding three months but fell 7.4% compared with the previous year.

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Mixed sector performance

Individual sector performance results were mixed, with many still heavily affected by materials and skills shortages, caused by ongoing supply chain issues and geopolitical disturbances.

Overall, housing was one of the worst performers in the three months to February, with project starts 21% lower than the preceding three months (Oct-Nov 2021), plummeting 46% compared to the same period in 2021.

Private housing starts fell once again (-23%), contributing further to the ongoing downward trajectory which has characterised this vertical over the last few months. Social housing project-starts faired little better, falling 16% during the three months to February .

In the non-residential sector, hotel and leisure project-starts continue to be a strong performer, having grown almost a quarter (23%) and up 7% on a year ago.

Office and retail-starts also increased 17% and 11% in the three months to February, but were still down 6% and 15% compared with the previous year respectively. Likewise, infrastructure-starts increased a meagre 2%, but were 27% lower on 2021.

Other sectors continued to struggle as external factors continued to bite, with health (-21%), education (-2%), civils (-17%) starts all falling in the three months to February, respectively down 18%, 15% and 34% against the previous year.

Regional breakdown

The North East managed to buck the declining trend, experiencing 6% growth on both the preceding three months to February and on the same period in 2021. This is, in part, attributable to a number of projects coming online, including an £11 million office development in Middlesbrough.

Scotland and London also saw growth on the last three months, at +13% and +9% respectively but were still down -36% and -26% on figures a year ago.

Elsewhere, the majority of regions have performed poorly during the three months to February.

Commenting on the Review, Allan Wilen, Glenigan’s Economic Director, says, “Socio-economic events, which have held back sector recovery obstinately persist and now, with the added geopolitical factor in the Ukraine, supply chains will be squeezed further.

“This will inevitably increase demand, and price, on essential structural materials which might prompt many clients and contractors to push back starts until availability of building products becomes more reliable and cost effective”

He continues, “This will obviously impact performance levels, but, so long as even a few of these lingering issues resolve themselves over the next quarter, I expect we’ll see a renewed burst of activity in line with a solidly growing pipeline of planning consents.”

To download a copy of the full March Review click here.

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

Construction growth experiences short-term slowdown

Pace of sector recovery reduces in 3 months to end of July 2021, but long-term indicators suggest quick return to upward momentum

Value of project starts in three months to end of July 2021 dips by 14% compared to buoyant start of the year
Planning consents down 20% in three months to end of July 2021 against previous three months
However, contract awards show resilience, three months to end of July 82% up on same period in 2020 and 43% above same period in 2019
Non-residential RMI Work increases by 2.3% in three months to end of July, up over 50% against previous three months in 2021
East of England region on the brink of return to pre-COVID levels of output

Glenigan, the construction industry’s leading insight and intelligence experts, has released the August edition of its Construction Review.

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

Short-term slowdown

Following a growth spurt in the first half of 2021, momentum has started to show signs of slowing down. This recent decline has been led by a sharp fall in private residential and civil engineering work.

Overall, the value of projects starting on-site averaged £5,497 million per month in the three months to July. Despite being 27% higher than the same period in 2020, it remains 14% lower than the preceding three months in 2021.

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Fig 1. August Construction Review Summary

This sudden fall can be attributed, in part, to a 19% decline in the value of underlying project (<£100m in value) starts. Although these were up 36% on 2020, the figures are still 24% lower than pre-pandemic levels.

Whilst the value of major projects remained unchanged (£1,740 million per month) against the preceding three months to July, they were still 2% down on 2019 levels.

Best laid plans

Planning consents have also seen a slip during this slower period, down 20% against the previous three months. Major planning approvals are more stable, but also witnessed an 8% decrease.

However, on a positive note, planning consent levels remain significantly higher on both 2020 and 2019.

Back on track

Looking further ahead, the strengthening pattern of main contract awards points to renewed growth in project-starts during the second half of the year.

Although the value of main contracts awarded slipped 1% against the previous six months, it remained 43% above the same period in 2019 (82% up on 2020). Putting this into perspective, major contract awards were three-and-a-half times higher than a year ago and 98% ahead of pre-COVID levels.

Recovery progressing

Despite the m-o-m decline, second quarter output was up 3.3% on the preceding three months.

Further, some areas of activity saw modest growth on Q.1, with RMI work increasing by 2.3% (53.5% ahead of 2020 figures). Much of this is accounted for by non-housing repair and maintenance work, perhaps reflecting the easing of COVID-19 restrictions and calls from Government and business to return to city centre workspaces.

There was also a slight uptick in new-build output (3.9%) in Q.2 against Q.1, with private housing experiencing a marked upward spike of 10.6%.

In line with Glenigan’s previous reviews and indexes, infrastructure has been the strongest performing sector for new work, rising 15.9% against the preceding quarter.

Industrial and commercial sector activity also rose by 3.8% and 0.8% respectively against the first quarter.

The biggest losers were the new public residential and non-residential sectors, which saw a slight dip in output of 1.5% and 1.4% respectively.

Strong performers

Regionally, Scotland achieved strongest growth project-starts against the previous year (124%) during the previous three months to end of July 2021. However, these figures were still below 2019 levels.

Yorkshire and The Humber also achieved three digit growth on 2020, but slipped by 14% against the previous three months.

Recovery is strengthening in the East of England, which is the closest UK region to returning to 2019 levels of output against the previous three months to July. Climbing 58%, the area is now only 9% off a pre-pandemic footing.

These positive figures are further tempered with continued output decline registered in Wales, the North East and South East. This highlights the sector still as a way to go to full nationwide recovery, even if good progress is being made.

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Commenting on the findings, Glenigan’s Economic Director, Allan Wilen (above) says, “There’s no doubt the slowdown seen over the last three months has been the result of a perfect storm of external events, beyond the industry’s control.

“Supply chain issues continue to bite and look likely to remain a challenge for the foreseeable future. However, the sector is showing its strength across the board, and this modest slowing of pace is certainly not as serious as many might have predicted.

“With a number of major projects in the pipeline, a potential national green retrofitting programme and core infrastructure remediation work upcoming, there are reasons to stay positive as we look to the second half of 2021 and beyond.

“Our recent Forecast for 2021-2023 indicates 2022 will see a return to pre-COVID levels of project-starts, and whilst we’re not there quite yet, we’re seeing lost ground being made up at a quicker rate than anyone would have predicted this time last year.”

To request a copy of Glenigan’s full August Construction Review, with sector-by-sector analysis, click here.

Scottish construction shows signs of strong recovery

Scotland demonstrates strong growth in the wake of pandemic and despite supply shortages

Scotland leads post-COVID industry recovery, growing 124% on the value of project-starts compared to last year
UK value of underlying work (less than £100 million in value) up 35% on 2020 figures but down 16% on preceding three months on a seasonally adjusted basis
Nationwide, retail proves a stand-out sector with 150% growth on project-starts, and residential project starts rise by over a third on previous year

Glenigan, the construction industry’s leading insight and intelligence experts, has released the August edition of its Construction Index.

This report provides a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals unique insight into results from the second quarter of 2021 and the last twelve months.

Strong growth for Scotland

Scotland has been leading the Covid-recovery, achieving strong growth of 124% on the value of project starts against the previous year, this is despite a 15% dip compared with the previous three months of this year.

UK-wide signs of increase

Despite a slight setback for underlying work (less than £100 million in value) in Q.2 of this year dropping 16% on Q.1, the construction industry is regaining its feet. A rise of 35% on figures in the same time period in 2020 show a sector on the way up.

Residential work on the rise

The value of residential work being carried out on-site is also on the rise, climbing 36% against the previous year. However, this fell 28% compared with the preceding three months (seasonally adjusted) and is down 33% on 2019 figures.

Private housing has also shown growth as one of the best-performing sectors, with the value of project-starts rising by over half (54%). Again, these figures are off the back of an initial dip, down 29% on the preceding three months of this year and 32% on 2019 levels.

Retail and offices provide boost

Retail was the stand-out sector during the period, with project-starts having increased 150% against the previous year up 34% compared with the same period in 2019. Retail-starts also increased 83% compared with the preceding three-month period.

Non-residential sectors also performed above 2020 figures, climbing 43% and increasing by 7% in Q.2 on three months previous.

Health projects show vitality

Despite a slight dip in health project starts in Q.2 of this year falling 12% on Q.1, the sector has seen a 7% rise on the previous year and a 43% increase on the same period in 2019.

Similarly, hotel and leisure project-starts have performed poorly in recent months, however, sector growth has nearly doubled against the previous year (94%) and increased 52% on Q.1 of 2021.

Improvement needed for infrastructure and civil project-starts

An area in need of improvement is underlying civil engineering project-starts which increased just 1% on 2020 but fell 41% on the preceding three months. This was also down 40% compared with the same period in 2019.

Infrastructure starts were also down 16% on the previous year and 49% compared with Q.1 of this year. The sector was also declined by 43% on the same period in 2019.

However, utilities starts show much more promise, increasing by nearly a half on 2020 (47%) but down 18% on the preceding three months of Q.1 of this year.

Strong regional performance

Yorkshire and the Humber also achieved three-digit growth on 2020 (110%) and project-starts in London climbed by over 50% against the previous year but was down 9% on Q.1

Project-starts in the East of England also rose by 58% against last year and were the only region to experience growth against the preceding three months (6%).

Rhys Gadsby, Glenigan’s Economic Analyst, commented on the latest figures: “The positive figures we’ve seen in Scotland serves as a strong indicator the construction sector recovery is not limited to London and the South East.

“However, they should be note of caution. While the value of project-starts remains substantially higher than the lockdown-affected previous year, the value has continued to decline in recent months.

“Material supply problems may have contributed to the fall; however, a decline was expected following a surge in activity, due to pent-up demand, during the first quarter.

“More positively, the speed of decline slowed during July. Main contract awards and detailed planning approval were high compared with previous years, so it is only a matter of time before this has a positive impact on project-starts.

“Furthermore, the successful vaccination roll-out, as well as the ending of restrictions on daily life, should give investors – particularly in non-residential sectors such as hotel & leisure – the confidence to progress projects to site.”

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