Glenigan, one of the construction industry’s leading insight and intelligence experts, in its September 2022 edition of its Construction Review, focusing on the three months to the end of August 2022, says project-starts performance has plummeted as soaring material, energy, and fuel costs continues to hamper industry activity.
Detailed planning approvals and main contract awards also weakened against the same period last year, as the cost of living crisis impacts economic growth and more stringent building regulations further constrain the development pipeline.
The September review indicates a shrinking pipeline and marked decline in project-starts, with the situation worsening since last month’s Review. Significantly, work commencing on-site fell 41% against the preceding three months to stand 48% down on the year before.
Weak Major project-starts performance was the primary contributor to this period of consistent decline, falling 54% against the preceding three-month period. September also saw the value of major project-starts decline by almost three-quarters (-74%) against the previous year to average only £1,071 million per month.
The value of underlying work fared little better, with starts-on-site declining 35% against the preceding three months to stand 30% lower than 2021 levels.
Similar to previous analysis, ongoing materials inflation caused by the Russia-Ukraine conflict is a key influencer of this downward progression. Furthermore, with wavering consumer confidence, as fears about the wider economy cool investment and stall short-term growth, UK construction has entered a vicious cycle with no immediate exit available.
However, the development pipeline seems to be gradually re-finding its feet. Main contract awards were relatively unchanged (-3%) compared with the same time last year, but fell 12% during the three months to August. Underlying main contract awards also declined 8% against the preceding three months, to stand 6% down against the previous year.
Major contract awards also modestly declined 4% against the preceding three-month period but were marginally up (+ 5%) compared to a year ago. Likewise, detailed planning approvals fell 7% against the preceding three months but remained 5% up on a year ago.
Major project approvals fell by a fifth against the preceding three months but experienced a value increase of more than a quarter (+26%) against the same period a year ago. Underlying approvals were unchanged compared to last year and increased 10% against the preceding three months.
August was a poor month for residential construction output, with project-starts falling sharply against both the preceding three months (-38%) and the previous year (-28%).
Performance was weak, once again, due to ongoing materials inflation and high energy tariffs, as well as the impact of Part L’s introduction. The vertical-wide lack of clarity on the new standard inevitably led to a softening of activity as developers rush to remain compliant, stalling activity until regulatory requirements can be met.
Major project-starts were responsible for the decline, falling 65% against the preceding three-month period and 44% against the previous year. Results for main contract awards were also weak, falling back 12% compared with the preceding three months to stand 2% down on a year ago.
Poor performance in the non-residential sector echoed the general tale of decline and fall in the construction industry.
A more positive outlook for health and education reported in previous iterations of the Review was offset by a weakening in project-starts during the period covered by this edition, with both sectors diving by a third and 18% during the three months to July, respectively, to stand down on the preceding three months. Each declined against the previous year, with health work falling back by a fifth and education-starts by 36%.
Offices-starts plummeted by more than a half (51%) against the previous three months to stand 48% down on the previous year. All other sector verticals posted a decline against the year before.
A strong performer during the early months of 2022, industrial project-starts fell by a quarter against the preceding three months and by 27% compared with a year ago.
Civil engineering starts fell 27% against the preceding three months and 25% compared to a year ago. Utilities work starting on-site fell by a third while infrastructure-starts fell by a quarter during the three months to August. Both sectors experienced a value decline of a quarter against the year before.
Hotel & Leisure construction-starts were largely unchanged compared with the preceding three months but stood 38% lower than a year ago. In contrast, Community & Amenity work starting on-site fell 51% against the preceding three months, but declined only 5% compared with the same time in 2021.
All areas of the UK experienced a decline against the preceding three-month period, with Northern Ireland the only area to experience growth against the previous year. This being said, the region posted a very significant growth of 87% compared with a year ago.
In contrast, London experienced the weakest period for project-starts, with the value declining 55% compared with the preceding three months to stand 62% down on the previous year.
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