The latest Snap Analysis report from leading construction industry intelligence provider, Barbour ABI, shows a decline in planning applications in March that could predict a downturn in construction activity over the coming months.
But Tom Hall, Chief Economist at Barbour ABI, says: “Later stage planning continues to go from strength to strength. It is excellent news that later stage planning is at record levels, particularly in the commercially sensitive sectors.
“We’ve seen some of the highest levels of contract awards in more than a year in both the residential and commercial construction sectors. The major office redevelopments being kicked off in London indicates that for many companies located in the capital, Covid-induced working from home policies could be being phased out.
“There are however a lot of uncertainties and risks at the moment: weakness in the domestic economy, a record tax burden coupled with high inflation, continuing shortages of goods, Brexit impacts and public sector austerity. These all increase the chance of a slowdown in construction as we move into the summer. We’ve seen a slowdown in planning applications that may be a foreshadowing of this.”
Barbour ABI’s Snap Analysis is a monthly report that takes a deep dive into the three stages of the planning process for construction projects across the UK in a range of sectors. By including planning applications, planning approvals and contract awards and examining the data by industry sector and geographical region, the analysis gives a robust and detailed look at the construction industry currently and in the short and medium term.
March’s analysis revealed that construction is currently very buoyant, with a fantastic £8.6bn of contracts agreed in the month. This helped Q1 to the highest ever quarterly value at an average of £7.6bn of contracts awarded each month. The residential, infrastructure and commercial construction sectors were the standouts for contract awards in March.
Residential construction topped the group with £3.5bn of contracts awarded in March. This was a 50% increase on the previous month and the highest monthly amount in more than one year. Residential construction activity is fairly well spread across the UK with the highest levels being seen in Yorkshire, East of England, London, North East, North West, Scotland and Wales.
There were also good levels of contract awards in infrastructure construction projects in March, with a total of £2.2bn of contracts agreed; a good improvement on a weak February. This positive result was largely driven by a £683m CHP plant in London and £197m for the M54 to M6 link road in the West Midlands.
Significant office construction activity boosted the commercial construction sector, which recorded £1.3bn of contract awards in March. Again, this was the strongest month for more than a year. Three major office developments in London – 105 Victoria Street, 19-35 Baker Street and the Barclays HQ fit out – were the main drivers of the growth in this sector. This could indicate that companies are trying to win employees back into the office following two years of disruption.
The value of contracts awarded in the Hotel & Leisure, Industrial, Healthcare and Education construction sectors suffered in March, especially in the Hotel & Leisure sector, which dropped by 74% over February.
Looking to the near future with planning approvals, the picture is less rosy, with a fall of 22% over February levels. However, strong performances in the Residential and Healthcare construction sectors meant March was still a positive month with high levels of activity.
Infrastructure planning approvals were exceptionally high in February, so March was always going to be lower, however, with £1.5bn of planning applications approved it was still a positive month for the sector. This continues to be driven by the development of new renewable energy production and storage facilities.
Hall adds: “While the current state of the industry is positive with lots of activity and record-breaking levels of contracts awards and planning approvals in some areas, the horizon is more concerning. Overall, the level of planning applications received in March was low and raises questions about the delivery of the Government’s commitment to raise the standard of healthcare across the country and its flagship levelling up agenda.”
