Pipeline of Approvals and Main Contract Awards are Cause for Optimism, According to Glenigan Review

• Value of detailed planning consents in Q4 rises 17% against Q3
• Construction output during Q4 rises 1%, up 4.6% on last year
• Hotel and leisure only underlying sector (less than £100m) to see growth, up 23% on previous year and 35% on past three months
• Industrial starts up 44% on previous year but down 18% in January against preceding three months
• Wales only area of the UK to see growth on previous year (+29%) and Q3 2021 (+34%)
• Project-starts due to recover as supply constraints ease

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

This monthly report provides a detailed and comprehensive analysis of construction data, offering built environment and property professionals unique insight into sector results (seasonal adjusted), from the three months to the end of January 2022.

A significant takeaway is that, whilst underlying project starts (those with a construction value of less than £100 million) have been abnormally weak in January, with the value of work at its lowest since spring 2020, a rise in detailed planning approvals and main contract awards offer hope for the coming months.

Planning consents strengthen

Despite project starts continuing to weaken during the three months to January, with a decline in both underlying projects (under £100 million) and major projects (£100 million+), a firm development pipeline is in place. This will be helped along by the easing of supply shortages which is due to provide a welcome boost to project starts in future months.

The sharpest decline was seen in major projects (£100 million+), averaging £966 million a month, half the value of the preceding three months and 16% lower than a year ago.

Detailed planning consents are also helping to combat a 26% drop in the value of project-starts from over the past three months, rising by nearly a fifth (17%), showing promise that work is on the horizon.

The uptick was driven by a 23% increase in underlying project approvals (less than £100million in value) against Q4 2021, to stand 15% up on a year ago.

Output on the up

Latest ONS figures also paint an encouraging picture for new work construction output, rising 1.1% during Q4, up 5.4% on a year ago. New work activity was driven by an 8.7% rise in industrial work and a 4.9% increase in public non-residential output. Commercial output also rose 2.1% against the previous three months but was 11.1% lower than a year ago.

Overall construction output during Q4 2021 rose by 1% against the preceding three months, up 4.6% on a year earlier. This rise in on-site activity for the final quarter took construction output growth for the year to 12.7%.

Repair and maintenance output also grew 0.8% (SA) during the three months to December of last year and was up 3.1% on a year ago. The rise was led by a 2.3% increase in public housing RM&I work (repair, maintenance and improvement) and a 1.0% rise in non-housing R&M).

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Hotel and leisure buck the trend

Whilst overall sector performance has suffered, hotel and leisure were the only category to see growth, up on 2020/2021 levels (+23%) and the preceding three months (+35%),  

Social housing project starts did increase 3% on the past three months but the value fell by nearly a third against 2020/2021 figures.

Industrial starts, which were the strongest performer in Q4 in 2021, dropped 18% in January against the previous three months but is up 44% on the same time period in 2020/2021.

Private housing was the worst-performing sector, falling by nearly half (49%) against the previous year and nearly a third (28%) against the previous three months.

Solid growth for Wales

Looking at regional analysis, Wales was the UK’s standout area, with an overall growth of nearly a third (29%) on 2020/2021 levels, and a 34% uptick on the preceding three months.

Scotland and the South West also witnessed a performance boost on the preceding three months, increasing 2% and 11% respectively.

Conversely, the most dramatic fall was registered in the West Midlands, with project-starts down 42% against the preceding three months and 64% on the previous year. 

Economy continues to thrive

Growth during Q4 2021 has helped the economy bounce-back to near pre-pandemic levels, increasing 7.5% in 2021. This has been partly due to the lifting of COVID-related restrictions, although the UK’s recovery has been slower compared to other leading economies.

Overall employment levels are also improving and the CIPS has reported that UK manufacturers have seen a strong start to 2022, with rises in production output and employment. This bodes well for contractors and developers in the coming months, indicating persistent supply chain pressures easing.

Commenting on the February Review, Glenigan’s economic director, Allan Wilen, said, “January has been a tough month across nearly all sectors, but an increasingly robust pipeline of planning approvals points to growth in the months ahead. The waning impact of external challenges such as COVID restrictions and material shortages is also having a positive effect, helping the industry’s bounce-back, bringing a welcome boost to construction output and vindicating our own strong forecasts for 2022/2023.

“It’s also promising to see the UK economy get back to its feet, which is likely to create a knock-on effect for construction, in terms of more work and employment opportunities. To this, it will be great to see levels of project-starts begin to increase again, once planning consents convert to shovels on site”.

In order to request a digital copy of Glenigan’s February Construction Review, click here.

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