Glenigan Construction Review – Project Starts Decline as Weak Economy Holds Back Progress

• 44% fall in project-starts against the previous year
• 26% decline in main contract awards during the three months to November
• 12% rise in detailed planning approvals against 2022 levels

Today, Glenigan, one of the construction industry’s leading insight and intelligence experts, releases the December 2023 edition of its Construction Review.

This Review focuses on the three months to the end of November 2023, covering all major (>£100m) and underlying (<100m) projects, with all underlying figures seasonally adjusted.

It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals a unique insight into sector performance over the last 12 months.

The central finding of the December Review is that falls in project-starts, consistent throughout the autumn, worsened during the three months to November in the face of cost pressures and high inflation across the economy.

Main contract awards also weakened against the previous three-month period, as dented industry confidence continues to hinder construction activity.

High interest rates and inflation are likely to further constrain projects moving to site, but a 12% rise in detailed planning approvals against the previous year suggests a strong development pipeline should help to turn the tide in Q.1 2024.

Commenting on the December Review, Allan Wilen, Economics Director at Glenigan, says, “Unfortunately, this Review shows the construction industry is still struggling under the burden of high interest rates, a weak economic outlook, and political turmoil. This has had a significant effect on private non-residential investment. Elsewhere it has delayed publicly funded projects in areas such as health and education, which the Government is approaching with trepidation as budgets are squeezed.

He continues, “Focusing on the industry as a whole, we can expect slow progress, which will prevent a quick recovery in project-starts. Despite this, we’re starting to see evidence of an improving development pipeline, with a small uptick in planning approvals. This should, hopefully, buoy the industry in the New Year.”

The sector-specific and regional index, which measures underlying project performance, paints a picture of general decline. Project-starts across every vertical fell in the three months to November.

Underlying Sector Analysis – Residential

The Review period was relatively stable for residential construction, with project-starts falling 3% against the preceding three months to stand 12% lower than a year ago.

Social housing construction-starts were largely responsible for the decline, falling by a tenth against the preceding three months and by 5% compared with last year.

However, this was balanced out by private housing-starts which were little changed on the preceding three months, dipping 1% during the three months to November, despite coming in 14% down on the year before.

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Sector Analysis – Non-Residential

Poor performance in the non-residential sector echoed the industry-wide tale of decline and fall.

Amidst the continuing cost-of-living crisis, hotel & leisure construction-starts suffered during the three months to November, tumbling 15% against the preceding three months to stand 49% down on 2022 levels.

Similarly, industrial construction-starts fell 23% against the preceding three months and by just under a half (-49%) compared with a year ago.

Health and education project-starts plummeted 50% and 19% during the three months to November, respectively. Both also fell against the previous year, with health-starts dropping 51% and education-starts by 13%.

Office-starts fell by 21% against the previous three months, and were down 44% on a year ago.

Civil engineering starts fell by 18% against the preceding three months and 31% compared to a year ago. Utilities work starting on-site weakened 31% during the three months to November to stand 45% down on 2022 levels. Infrastructure also experienced decline, with project-starts falling 10% against the preceding three months and 20% against the previous year.

Regional Performance

Yorkshire was the only area of the UK to experience growth against the preceding three-month period, with the value of project-starts rising 18%, yet still declining by a fifth compared to a year ago.

Wales also had a relatively good period compared to other regions, with project-starts rising 5% against last year’s figures, but falling back 13% on the preceding three months.

All other regions experienced decline against the Review period.

In contrast, the West Midlands and the East Midlands both experienced particularly weak periods for project-starts, declining 22% and 13% respectively on the previous three months and remaining 34% and 47% down on 2022 levels.

The North East experienced the weakest period for project-starts compared with the preceding three months, with the value declining 30% to stand 22% lower than a year ago.

Scotland also experienced a steep fall, to finish 21% lower than the preceding three months to November, a value decline of 35% compared to 2022.

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