Industry Insights – May

Contract awards fell back to £4.7bn with continued uncertainty – Barbour ABI’s view

After recent strength, contract awards have slipped back in April with £4.7bn. Among other industry insights in May, Barbour ABI stated that the uncertainty and constraints caused fluctuations between high and low activity levels each month.

Contract awards fell by 33% month-on-month

Overall momentum is lower compared to the second half of 2022. Although the trend is maintaining at around the long-run average of contract awards.

The residential, infrastructure and hotel and leisure sectors fell significantly in April by 40%, 71% and 54% respectively.

The commercial sector saw solid performance with £800m thanks to several large mixed-use awards. Plus, the industrial sectors continued at slightly above long-term average levels.

Finally, April was a superlative month for the education sector with £800m – continuing the sector’s recent resurgence – which was almost a new record: we need to go back to January 2015 for the last higher month.

Planning approvals have halved in April to £5.9bn

According to Barbour ABI‘s snap analysis, planning approvals did not have a great month in April. The construction industry insights from Barbour ABI highlight that the healthcare sector dropped by 93% to just £100m, while the hotel and leisure sector fell by 79%. Both the residential and infrastructure sectors had difficult months with £2.8bn and £0.8bn respectively.

Only the commercial and education sectors maintained their momentum at slightly below their long-term average levels, as did industrial with the sole above average monthly value.

April was the famine after the Q1 feast. All sectors apart from industrial fell back to below-average levels of planning approvals, with many large percentage falls.

30% increase in planning applications but a weak Q1 outcome

Planning applications returned to more normal levels with £9.1bn in March, however Q1 showed a large fall of 22% after a good 2022.

In particular, the residential sector looks to be in trouble, with £3.7bn in March and £3.5bn for Q1. This is equivalent to the value in the first Covid-19 lockdown. The commercial and hotel and leisure sectors also remained weak in March and in Q1.
More positively, activity in the infrastructure and healthcare sectors is being maintained thanks to renewable power generation and hospital refurbishments. And finally, the industrial sector saw its highest month for a year with £1.6bn.

Q1 planning approvals indicate new work opportunities – Glenigan’s view

According to April’s Glenigan Construction Review, planning approvals for industrial, office, hotel & leisure and major health projects were particularly strong in Q1.

Overall, detailed planning approval was given for new construction projects worth an average of £12,425 million in each of the first three months of 2023.

Major projects (worth over £100 million) fared particularly well in the first quarter. They were up 122% on the figures from Q1 last year and helped by some major one-off schemes.

Other industry insights: Increasing demand for BREEAM certification due to energy costs and net zero targets

Potential buyers and occupiers are becoming more interested in BREAAM certificates. They value the clarity which BREEAM certification brings to the building’s running costs and sustainability credentials.

In May, Glenigan confirmed that companies working in the commercial and industrial construction sectors benefit from experience with BREEAM for winning new work.

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