Industry Insights November

November construction insights: Contract awards continue to defy expectations

In this month’s industry insights, we review the latest construction data from Barbour ABI and Glenigan. October was a strong month for contract awards and the level of planning approvals remains stable for the third month. Although it has been a good month for contract awards, the future pipeline of work does not look as strong. Planning applications remaining at a low level, partly due to ongoing material, labour and energy supply chain disruption holding back construction activity.

Contract awards ‘Surprisingly Strong’ – Barbour ABI’s view

In the November Snap Analysis, Barbour ABI reported that contract awards continue to surprise with £8.1bn in October. A ‘surprisingly strong’ result for the third successive month, despite the wider uncertainty’. It was an abnormal month with many large scale project awards with 13 projects were over £100m. This made October the biggest month since March’s £8.6bn.

London had an excellent month with several large office and mixed-use developments. The commercial sector contract awards rose by 120%, up to £1.8bn. The industrial sector also performed well, with yet another month of over £1bn, thanks to warehousing projects.

Healthcare saw £500m, its first excellent month since December 2021. Meanwhile, residential sector fell back by 17%, but remained above the long term average.

Although approvals remain stable, planning applications are in decline

The Barbour ABI Snap Analysis also shows that the recovery of planning approvals continues into a 3rd month with £8.6bn in October. Although the level of planning approvals is improving, planning applications is on a downward trend.

The November snap analysis points out that planning applications’ £8.4bn is a downward trend. It’s a 6% fall in application value, and there are falls for commercially sensitive sectors. The residential sector fell by 21% and £3.6bn, the lowest month since April.

Industry focus: hotel and leisure sector

The hotel & leisure sector is struggling with rising costs and tight consumer budgets, but indoor leisure facilities continues to attract significant new investment.
According to the Glenigan 2023 forecast, indoor leisure facilities will drive a 9% rise in the value of underlying project starts for the hotel & leisure sector. This includes projects such as venues for immersive experiences, sports halls, gyms, cinemas and family attractions.

‘’The next 24 months will be challenging’’ Glenigan construction review’s take

The challenging economic environment is holding back construction activity. The material and labour supply issues have delayed work on-site and prompted some schemes to be redesigned. Glenigan claim that these factors have contributed to a 23% increase in the time taken for a project to progress. The time from planning consent to starting on-site increased to 21 weeks, whereas it was previously 16 weeks in 2019.

Overall, project starts are forecast to slip back by 2% in both 2022 and 2023. The current spike in inflation, higher taxes, and rising mortgage costs are expected to impact consumer related projects such as housing, retail and hotel and leisure. In contrast, Glenigan analysts state that ‘firm development pipelines are forecast to lift industrial and office starts.’

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