Industry Insights – June

Activity levels remain low according to the latest construction industry insights, data and reports. Glenigan continue to report a poor performance at the end of May.

In the June Glenigan index, the Chief Economist stated,

‘Starts remain significantly down on a year ago’ and that ‘the sector looks to be in for a challenging period with commercial starts falling back.’

They cited causes such as skyrocketing interest rates and a weak economic outlook which continue to dampen investor confidence.

On a brighter note, Glenigan cited industrial, healthcare and housing developments as having a more positive pipeline. In June, Glenigan claimed that prospects are improving for industrial because most regions saw higher industrial planning approvals during Feb-April that is starting to appear in the pipeline of work. Yorkshire and Humberside saw planning consents worth £567 million, double last year’s value.

The industrial sector upturn is centred on small and medium-sized warehouse/logistics projects while planning approvals for major industrial projects (over £100 million) have continued to fall.

Contract awards increased by 20% (back up to average)

In May, contract awards rose to £5.6bn, the long-term average. It’s still a subdued level compared to the recent past though.

Whilst other sectors had a weak performance, the residential and commercial sectors saw a welcome increase in contract awards. Despite fluctuating activity levels, the residential sector saw a 74% increase month-on-month to £2.4bn. Activity in the commercial sector also continued with £900m, an above average level for the 3rd month in a row.

In the industrial sector, there was a 37% drop in contract awards. May’s £50m was the lowest level since last June. The industrial sector seems to be on a new lower path, with the 2nd month in a row below £1bn. The last time this happened was in 2021.

Planning approvals and applications remains weak

There was an overall poor level of planning approvals and another drop in planning applications to £7.4bn.  Approvals’ recent weaker trend continues with £6.1bn, after April’s disappointing £5.9bn.

Healthcare was the only sector that was significantly above the long-run average, however, that was only because of a single large project. That being said, the prospect of a boost to hospital construction / renovation work emerged last month when the Government relaunched it’s £20 billion programme.

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