Industry insights – July

Q2 activity falls by 21% compared to Q1

According to Glenigan, main contract awards averaged £6,030 million per month in Q2. That’s 32% down on the last quarter and 30% lower than the same period a year ago. This is the third month of lower activity levels for contract awards, confirming the new lower trajectory.


Signs of slowing construction activity

Most sectors experienced a fall compared to Q1, adding to the mounting evidence of a slowdown in the second half of the year. This is further reflected in the project starts, which remain frustratingly sluggish. The number of projects starting on site was 26% lower in Q2 than Q1, finishing 42% lower than the same period last year. Additionally, the economists at Glenigan reported that ‘the fall in previously buoyant sectors is concerning for overall activity levels.’


Planning approvals recovers to a more usual level

Despite a very weak Q2 result, June’s planning approvals showed a recovery up to a more normal value of £8.4bn. This was mainly down to very large renewable power generation projects and a record in major hospital refurbishments. The growth in infrastructure and healthcare planning approvals somewhat masked the underlying weakness in commercially sensitive sectors. The residential sector suffered its worst quarter since 2016.


Industry insights show a very weak level of planning applications

In terms of planning applications, commercially sensitive sectors have been showing signs of weakness for a while. The residential sector saw just £3.3bn of applications in May, a relative strength index (RSI) of just 15.

Only the commercial and education sectors were at or above the long-run average level of planning applications in May. This resulted in another very weak month for planning applications with £7.3bn, according to Glenigan insights published in July. Detail planning approvals declined 29% against the preceding quarter, but only 1% lower than 2022 levels. Underlying detailed planning approvals averaged £4,373 million per month, decreasing by 5% compared with the preceding quarter, to stand 28% lower than a year ago.


Industry focus: hotel and leisure construction

There was over £1.4 billion granted detailed planning permission in the three months to June 2023, according to Glenigan. This total of hotel and leisure projects is up by 20% on the second quarter of last year. London is usually the heart of hotel construction work, but there is work outside of the capital now, especially in the South East. The value of planning approvals doubled in the South East with a total of £179 million given the green light in Q2 2023. This includes an £18 million development in Aylesbury and the Bugle Hotel in Reading.

Hotel construction is also growing the South West region, with a £16.3 million development in Bath and a £13.1 million hotel at Dartmouth in Devon coming though the pipeline. The total value of hotel & leisure projects where a contract was awarded in Q2 of 2023 has also improved, rising 4% on a year ago.

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