Glenigan, one of the construction industry’s leading insight and intelligence experts, has released the October 2023 edition of its Construction Review which focuses on the three months to the end of September 2023, covering all major (>£100m) and underlying (<£100m) projects, with all underlying figures seasonally adjusted.
It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals a unique insight into sector performance over the last 12 months.
The central finding of the October Review is starts on site remained weak throughout Q.3, falling by almost half (-40%) compared to last year and 9% lower than the preceding three months to September.
Main contract awards also slumped as UK construction continues to be battered by economic headwinds and sudden, ad hoc policy change, dropping 27% against the preceding period, to stand 12% lower than the same time in 2022.
Particularly, ever-increasing interest rates and labour shortages are stifling activity. Furthermore, the recent decision to cancel HS2 Phase 2 will have a seismic effect on many verticals in the coming months, particularly civils, which has just started to rally following a protracted period of decline.
However, a small degree of hope appears on the horizon. Detailed planning approvals were up 12% on the preceding three months to finish 32% up on the year before, suggesting the green shoots of recovery are tentatively appearing.
Commenting on the Review, Glenigan’s Economic Director, Allan Willen says, “Starts on site continue to soften and, as economic and political disruption continues, we’ll likely see clients and contractors continue to adopt a cautious approach to start dates until the landscape looks a little less hostile.
“The Prime Minister’s recent cancellation of HS2 Phase 2 is very disappointing, with many having already heavily invested both in the project and the new development opportunities that it would have unlocked. However, the promise of redirected infrastructural investment in the North should shine a light. It may help offset constrained activity with a boost to major projects down the line. Hopefully, we’ll gain more clarity on the Government’s spending in the transport and energy verticals in the run-up to next year’s election.
“The Leader of the Opposition’s speech at the Labour Conference last week should also give contractors and developers some cheer, with a major focus on housebuilding should his party succeed in 2024. It will be interesting to see his proposed changes to planning laws take shape over the next 12 months.”
The sector-specific and regional index, which measures underlying project performance, painted a picture of general decline. Project starts across almost every vertical plummeted in the three months to September.
Underlying Sector Analysis – Residential
Residential starts remained down, falling 10% during the index period to stand 26% lower than a year ago.
Private housing was 23% down on the previous year and 10% lower than the three months to September.
It was an equally poor set of results for social housing, where project start levels dropped by 13% compared to the preceding three months and plummeted by 37% against 2022 figures.
Sector Analysis – Non-Residential
Non-residential performance was weak, particularly industrial project-starts, which suffered a 38% fall during the three months to September, with levels slashed by 62% compared to last year.
Retail also fared poorly with the value of project starts falling 14% against the preceding three months and 44% compared to the same period in 2022.
Education project starts declined 35% against the previous three months and 13% compared to last year. Offices followed a similar trajectory, with the value of starts on site 41% lower than 2022 figures and 22% down on the three months to September 2023. Once again, community and amenity starts fell, posting a 22% drop on the preceding three months, slipping back by 32% on the previous year.
Health work starting on site stumbled, falling back 25% against the preceding three months and remaining 24% below 2022 levels. Likewise, Hotel & leisure fell back 26% in the three months to September and 44% against the year before.
However, civils starts on site increased by 8% against the preceding three months, but failed to post growth on last year, falling back 28% compared to 2022. Infrastructure starts drove recovery on the previous period, increasing 48% against the preceding three months but remaining 13% down on the previous year. Utilities performance was poor, declining 32% against the preceding three-month period to stand 49% down on last year.
Regional Performance
Regional performance was poor, with a couple of exceptions. London performed relatively well, with project-starts increasing 10% during the three months to September but remaining 5% down on the year before. This growth was partially due to a bumper £1.5bn DWP fit-out project as part of the Estates Work Place Transformation Programme.
The South West followed a similar trend, with the value of project-starts remaining level against the preceding three months but falling 36% behind the previous year.
The West Midlands (-23%) and the East Midlands (-31%) performed particularly poorly against the preceding three months, falling back 49% and 52% against a year ago, respectively.
In the South East, the value of project-starts fell 17% against the preceding three months to stand 29% down on the previous year’s levels.
The North East (-36%) and East of England (-33%) both experienced a weak period, falling back 19% and 29% on 2022 levels, respectively.
Northern Ireland, Wales, Yorkshire & the Humber and the North West also suffered falls in project-starts against both the preceding three months and previous year.
