Construction sector performance continues to fall across nearly every measure, with residential construction starts the only increase
Glenigan’s latest assessment of the UK construction sector’s performance was a dispiriting affair, with virtually every measurement showing a decline.
This continues the trend observed over the last year, with work commencing on-site dropping a modest 1% against the preceding three months to July, finishing 33% lower than 2022 figures.
Whilst less severe than previous months, the Index’s findings are still low, with higher inflation, fluctuating interest rates and labour shortages identified by Glenigan as chief causes.
Residential was the singular sign of promise in construction sector performance, as a spike in private housing starts gave the figures a shot in the arm.
Looking forward, there is speculation that performance in the remainder of 2023 will potentially be hindered by the recently enforced Parts F and L, as well as the introduction of even tighter fire safety regulations.
Nearly all verticals were down by at least a quarter on 2022’s figures
Non-residential construction sector activity gave a poor performance, falling 23% during the previous three months and down 38% from a year ago.
Retail projects-starts were flat in the preceding three months- and 40% down in 2022.
Health sector starts showed signs of life with a 23% uptick in the last three months but still was a quarter down on last year.
Offices and Industrial project starts experienced a particularly poor period, both tumbling 50% and 51% compared to 2022 levels, respectively and also falling 35% and 24% against the previous three months.
Hotels and leisure declined by a fifth (22%) to stand 41% down on the previous year.
Education and Community & Amenity also crashed, dropping 34% and 36% against the preceding three months, to stand 7% and 40% down on the previous year, respectively.
Civils also saw a decline
Civil starts on-site dropped 25% against the preceding three months to stand 46% down on a year ago.
Infrastructure starts dropped 8% during the Index period, down 45% from the previous year’s figures.
Utilities starts also declined 43% during the three months to the end of July, finishing 49% down on a year ago.
Residential starts were the standout across the construction sector’s performance
Social housing performance was down by a quarter on the preceding three months and falling back 21% on 2022 levels.
Residential construction experienced an uptick, rising by a fifth (+21%) during the three months to the end of July, but remained 26% lower than a year ago.
Private housing, in particular, enjoyed a growth spurt, with starts increasing 40% during the Index period.
However, this improvement was still not enough to balance out a 26% drop in 2022 levels.
Regional performance was poor, with project starts weakening UK-wide
The South West and East Midlands recorded a slight increase, rising 9% and 3% on the preceding three months, respectively, but slipping back 32% and 37% on last year’s levels.
Starts in the East of England were similarly double-sided, with a 4% rise in the Index period, barely softening a 31% decrease compared to last year.
Wales experienced the heaviest fall, finishing 43% down on a year ago and 30% against the previous three months.
The North East also posted disappointing results, decreasing by over a quarter (26%) compared to the previous three months, declining 44% on 2022.
Project starts in the South East also experienced falls against both the preceding three months (-7%) and the previous year (-32%).
Yorkshire & the Humber and London weakened against the preceding three months, falling back 4% and 15%, respectively. Both regions were down on the previous year, remaining 35% and 30% lower than a year ago.
It was an equally poor showing in the West Midlands, the North West, and Scotland, as all had crashed compared to both the preceding three months and the previous year.
Both political and economic uncertainty appear unlikely to ease soon
Commenting on the findings, Glenigan’s economic director, Allan Wilen, says, “The disappointment continues as the market remains depressed, and given the unusual economic circumstances, this is hardly surprising. Uncertainty has stalled activity, and many investors, public and private, are reluctant to commit to new projects.
“Furthermore, 12 to 18 months out from a General Election, it’s likely the incumbent Government will adopt a more cautious approach, particularly to big infrastructure, in the lead-up. This will further slow activity in the short term.
“On the other hand, it was encouraging to see that private residential construction continues to rally, suggesting developers are altering their plans after a drop in starts during H.1 2023. The Home Office’s easing of visa restrictions for construction trades may also improve staff recruitment and help lift activity further in the second half of the year.”
You can find out more about the latest Glenigan Construction Index and other analysis here.
