Glenigan has released its March 2023 Construction Review, which has shown that over 50% of construction starts have faltered during the month of February as the industry navigates a tough economic landscape
Averaging £4,173 million per month, construction starts plummeted 55% against the previous three months’ performance to stand 46% lower than a year ago.
Main contract awards were also sluggish, dipping 16% in the run-up to March and down 15% on 2022 figures. However, detailed planning approvals registered a 19% increase in the three months to the end of February, growing 21% against the previous year.
Soaring energy and materials price inflation is largely to blame
Glenigan economic director, Allan Wilen, said: “This underwhelming performance can be largely attributed to ongoing external constraints on the UK construction industry, including soaring energy and materials price inflation, driven by international conflict and demand-led shortages.
“Coupled with high-interest rates and a raft of incoming business-led taxes, and you have a perfect set of conditions to dent consumer and investor confidence, resulting in depressed activity across most of the UK Construction sector.
“However, the current situation may ease in the coming months, political stability has improved over the last few weeks, and the expectation that interest rates will not increase as much as initially feared will hopefully provide a degree of certainty.”
The Spring Budget has offered ‘a future glimmer of hope’
He added: “The Chancellor’s Spring Budget announcement yesterday has offered a future glimmer of hope, particularly a significant pipeline of upcoming work through an ambitious, nationwide programme of Investment Zones and urban regeneration projects coupled with a promised upgrade of transport infrastructure. This will no doubt provide plenty of opportunities for hungry and agile contractors over the coming years.
“Also welcome is confirmation in the Spring Statement that the Government intends to ease the restrictions on the recruitment of overseas labour for five construction trades. This should help ease the staff recruitment and retention problems experienced by many firms in the industry.”
The residential sector painted a general picture of decline
In the residential sector, February painted a picture of general decline. Overall residential starts-on-site fell during the three months to February, dropping 27% during the index period to stand 43% lower than a year ago.
Private housing dropped 39% compared to the previous year, declining 29% against the previous three months.
Social housing also performed poorly, with work commencing on-site slipping back 22% during the three months to February and plummeting by 57% against the previous year’s figures.
Industrial performance was the lowest sector of non residential starts to decline
Non-residential starts also fell during the three months to February. Industrial performance was disappointing, sinking 41% during the three months to February to stand 57% lower than a year ago.
Retail also declined, with the value of project-starts declining 24% against the preceding three months and 39% against the previous year.
Office spaces lost momentum from their burst of activity in Q4 2022, with the value of underlying project-starts slipping back 23% against the preceding three months to stand 28% down on 2022 levels.
Health construction starts crashed, falling 34% against the preceding three months and declining 50% compared to the previous year. Despite a 1% hiccup against the previous three-month period, education project-starts were also 24% lower than last year.
Hotel and leisure rose 35% against the preceding three months
Hotel & leisure alongside community & amenity were two of only three sectors to experience growth against the preceding three months, rising 35% and 5%, respectively.
Civils performance slipped back 8% against the preceding three months to stand 17% down on a year ago.
Infrastructure starts dropped 18% against the preceding three-month period, remaining down 43% on the previous year’s figures. However, the decline in civils was partly offset by utilities activity, with starts increasing 6% against the preceding three months to stand an impressive 76% up on a year ago.
The North East and the South East were the only UK regions to perform well against the preceding quarter
Most parts of the UK experienced weak project-start performance during the three months to February. Despite this, the North East saw project-starts advancing 19% during the three months to January but remaining 20% down on a year ago.
Similarly, project-starts in the South East increased by 5%, but remained 27% behind the previous year. Performance in London and the South West was particularly lacklustre against the preceding three months, also slipping back 46% and 34% against the year before.
Some regions fared worse still, including Scotland, where the value of project-starts fell 31% against the preceding three months to stand 35% down on a year ago.
Yorkshire & the Humber experienced the sharpest decrease in construction starts against both the preceding three months (-53%) and the previous year (-61%).
Wales, Northern Ireland, the East Midlands, West Midlands, and the North West all suffered falls in project-starts against both the preceding three months and previous year.
