Prison construction gets a boost whilst project starts remain low

According to the latest construction industry data, the amount of project starts is at a 10 year low. However, there are some industry bright spots: prison construction gets a boost, and the hotel construction pipeline looks strong. In this overview, we summarise the latest construction industry data from analysts at Barbour ABI and Glenigan.

Prison construction gets a boost for major framework

The Ministry of Justice (MoJ) commissioned £1.4 billion-worth of construction work in the 12 months to February 2023. Prison construction projects are set for a £2.5 billion boost for the MOJ Constructor Services Framework. This is being used to support the government’s pledge to spend £4 billion on 20,000 new prison places.

‘Prospects for hotel construction improve’ – Glenigan’s view

Travelodge has announced a £3billion investment for 300 new hotels. They have written to 220 local authorities about identified sites, and they have larger schemes in the pipeline too. This expansion drive follows on from Travelodge awarding 18 contracts below £1million in the 12 months to February.

Hotel construction forecast

There are prospects for higher-end schemes according to PwC’s most recent UK hotels forecast. The report states that hotel construction prospects are better in Bath, Belfast, Birmingham, Cardiff, and Edinburgh. Recent hotel development in some cities such as Liverpool and Manchester could create over-supply and stunt development. There is also a trend towards more city aparthotels in the pipeline, according to the PwC forecast report.

Project starts have hit a 10 year low – Barbour ABI’s view

The volume of project starts in the first quarter of this year was lower than any three-month period in the past decade.

Contract awards down 30%

In Barbour ABI’s March snap analysis, the data shows that contract awards fell by 30% in February, down to £5.2bn. Meanwhile, planning approvals had a recovery back to £8bn.

The commercial sector enjoyed a consistent £600m of contract awards. The healthcare sector also had another good month with £500m, with 3 of the last 6 months around the half billion mark.

The education sector is showing small signs of recovery, also seeing £500m in February – so far 2023 is 20% up on the education sector figures in 2022. Construction for universities is set to provide reliable new contracts, according to Glenigan.

Construction starts continuing a ‘downhill trajectory’

Heading into Q2 2023, Glenigan’s April Index shows construction-starts continuing to slide on a downhill trajectory.

Project-start performance remained frustratingly slow across the sector throughout Q1, amid eye-watering price inflation and intense economic uncertainty.

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