The Glenigan Index of construction starts continues to report a decline in April. The value of underlying work starting on-site during the three months to April fell 23% against the preceding 3 months to finish 41% lower than a year ago.
Downward trend for construction starts continues – Glenigan’s view
The overall decline in construction starts continues into the May Glenigan Index with ‘crippling inflation’ and ‘soaring costs’ outlined as factors which are holding back activity.
The increase in energy costs and material prices has been affecting activity for a while. The confusion around new regulatory frameworks has been cited by Glenigan as one of the reasons for a decline in construction starts. The persistence of these pressures has inevitably led to a run of decline and delay, as contractors and developers pause project starts and investors hold-back until markets stabilise and prices come down.
‘Might be 2024 before interest rates soften’ – Allan Wilen, Glenigan’s Economic Director
“There’s little doubt starts on-site have crashed and, as highlighted by CPA’s forecast downgrading yesterday, it looks as if this protracted period of depressed activity across the entire sector will continue well into the year.
A weak economic outlook and myriad external events are to blame for the current situation, and it will likely be Q.4 2023, or even Q.1 2024, before we see a significant softening in interest rates. This will, it’s hoped, inspire the confidence needed to commit the collective shovel firmly into the ground on a nationwide scale.” States Allan Wilen.
Civil engineering work starting on site fell 18% and non-residential fell 29% against the preceding 3 months, standing 31% and 38% respectively against the previous year.
Residential construction-starts slipped back 18% on the preceding three months and 44% against the previous year. Particularly, private housing fell back sharply, 51% compared to 2022 and 23% on the preceding 3 months.
Industry Focus: Education sector
The education sector was the only area of growth, bucking the trend with strong numbers. The value of underlying project starts increased by 9 % compared with the previous 3 months to April. Finishing 23% up on 2022 figures.
The current education secretary, Gillian Keegan inherited a significant rebuilding programme which runs over ten years. It continues to be a key source of new construction work. The Department of Education capital budget rose from £5.2 billion to £6.3 billion in the 2022/23 financial year and £7 billion for 2023/24.
This is now translating into a new source of contracts for the construction industry. After a 13% rise in the value of project starts in the education sector last year, the Glenigan UK Construction Industry Forecast 2022-2024 predicted a rise of 14% during 2023 and 3% in 2024.
Continued investment in efforts to reduce the UK energy demand
The UK invests £400 million in electric car charging points, £1.5 million in solar panel construction work.
There will also be a £409 million investment in air source heat pumps as part of the government’s commitment to a 15% cut in overall UK energy demand by 2030.
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