Glenigan has released the October 2023 edition of its Construction Index. This edition focuses on the three-month period leading up to the end of September 2023
The Construction Index analyses all fundamental projects valued at £100m or less unless otherwise noted (all figures are seasonally adjusted).
The Construction Index report offers an in-depth analysis of year-on-year construction data. It provides insights for professionals in the built environment, offering a unique perspective on the sector’s performance over the past year.
The Construction Index reports more decline in activity
The October Index revealed a decline in project starts, continuing the overall downward trend seen throughout the second and third quarters of 2023. The value of on-site work dropped by 16% compared to the previous three months, resulting in a 32% decrease compared to the same period last year.
While there was some modest growth in civil engineering project starts, this positive development is likely to be short-lived due to uncertainties surrounding HS2. While poor performances were recorded in both residential and non-residential sectors.
Rising interest rates and the increased financial strain on households have had a negative impact on consumer confidence. This has caused investors in consumer-related industries to become uneasy, resulting in significant delays in starting projects across the UK.
The upcoming change in government leadership in the UK has led to reduced activity in the public sector, particularly in areas such as education and healthcare. As a result, project starts in these sectors have also been pushed further down.
“Many will be disappointed to see performance levels declining further after an extremely tough six-month period. Given the persistent economic and political uncertainty, it’s hardly surprising,” commented Glenigan’s economic director, Allan Wilen.
“With sky-high interest rates denting confidence, the Government is spending thriftily, holding back investment in public sector areas until a degree of certainty returns to the economy. This is not being helped by the prospect of a hotly contested election within the next 12 months, which may see a change in administration,” he continued.
Results have varied across the sectors
In the UK, the residential sector saw a significant 10% drop in project starts in the three months leading up to September, marking a 26% decrease from the previous year. Social housing and private housing also declined by 13% and 10% compared to the previous quarter, with substantial year-over-year drops.
In the non-residential sector, most verticals experienced substantial decreases in project starts during Q3. The education and health sectors weakened significantly, with declines of 35% and 25% compared to the previous quarter.
Office, industrial, retail, and hotel/leisure sectors also performed poorly, with declines ranging from 14% to 41%. Civil engineering was the only sector to see an increase of 8%, primarily due to infrastructure work.
Across UK regions, most areas witnessed declines in project starts, with the North East and East of England experiencing the most significant drops of 36% and 33%, respectively. The East Midlands saw a 52% decrease compared to 2022, while London had a 10% increase in project starts.
