Today Glenigan, one of the construction industry’s insight experts, release the August 2023 edition of its Construction Index.
The Index focuses on the three months to the end of July 2023, covering all underlying projects with a total value of £100m or less (unless otherwise indicated, with all 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.
Already well into Q.3, construction start performance continues to fall, tracking a consistent, downward trajectory which has persisted for over a year. Work commencing on-site dropped a modest 1% against the preceding three months to July, finishing 33% lower than 2022 figures.
Although a less severe fall than the past few months, these scores are still poor, with higher inflation, fluctuating interest rates and labour shortages to blame. Looking forward, performance in the remainder of H.2 2023 will potentially be hindered by the recently enforced Parts F and L as well as the introduction of even tighter fire safety regulations.
However, similar to the picture painted in the July Index, residential construction proved a rare bright spot in an otherwise gloomy industry landscape, with starts experiencing an upturn over the preceding three months. This was largely due to a spike in the private residential sub-vertical.
Commenting on the findings, Glenigan’s economic director, Allan Wilen, says,
“The disappointment continues as the market remains depressed, and given the unusual economic circumstances, this is hardly surprising. Uncertainty has stalled activity and many investors, public and private, are reluctant to commit to new projects. Furthermore, 12 to 18 months out from a General Election, it’s likely the incumbent Government will adopt a more cautious approach, particularly to big infrastructure, in the lead-up. This will further slow activity in the short term.
“On the other hand, it was encouraging to see that private residential construction continues to rally, suggesting developers are altering their plans after a drop in starts during H.1 2023. The Home Office’s easing of visa restrictions for construction trades may also improve staff recruitment and help lift activity further in the second half of the year.”
Taking a closer look at the sector verticals and UK regions…
Sector Analysis – Residential
Residential construction experienced an uptick, rising by a fifth (+21%) during the three months to the end of July, but remained 26% lower than a year ago.
Private housing, in particular, enjoyed a growth spurt, with starts increasing 40% during the Index period. However, this improvement was still not enough to balance-out a 26% drop on 2022 levels.
Social housing performance was weak, 25% down on the preceding three months and falling back 21% on 2022 levels.
Sector Analysis – Non-Residential
Performance across almost all non-residential verticals was weak. Falling 23% during the previous three months and down 38% on a year ago.
The health sector showed some signs of life, growing 23% against the preceding three months but remaining 25% lower than 2022.
Retail project-starts remained flat against the preceding three months to stand 40% down on the year before.
Offices and Industrial project-starts experienced a particularly poor period, both tumbling 50% and 51% compared 2022 levels, respectively and also falling 35% and 24% against the previous three months.
Hotel & Leisure experienced a weak period, with work starting on-site declining 22% against the preceding three months to stand 41% down on the previous year. Education and Community & Amenity also crashed, dropping 34% and 36% against the preceding three months, to stand 7% and 40% down on the previous year, respectively.
The decline in civils work continues, with starts on-site dropping 25% against the preceding three months to stand 46% down on a year ago. Infrastructure starts dropped 8% during the Index period, down 45% on the previous year’s figures. Utilities starts also declined 43% during the three months to the end of July, finishing 49% down on a year ago.
Regional Analysis
Regional performance was poor, with project-starts weakening UK-wide during the three months to July.
The South West and East Midlandsrecorded a modest increase, rising 9% and 3% on the preceding three months, respectively, but slipping back 32% and 37% on 2022 levels. Likewise, starts in the East of England rose 4% in the Index period, yet fell 31% compared to last year.
Wales experienced the heaviest fall, finishing 43% down on a year ago, and 30% against the previous three months. The North East also posted dismal results, decreasing 26% compared to the previous three months, declining 44% on 2022.
Project-starts in the South East also experienced falls against both the preceding three months (-7%) and previous year (-32%).
Yorkshire & the Humber and London weakened against the preceding three months, falling back 4% and 15%, respectively. Both regions were down on the previous year, remaining 35% and 30% lower than a year ago.
This was also the case in the West Midlands, the North West, and Scotland, which all crashed compared to both the preceding three months and the previous year.