Construction starts slump as investors hang back

Continued caution among investors has produced a 46% decline in the value of construction starts across the UK compared to a year ago. The April index from construction analytics company Glenigan shows project starts continuing to slide. Similar to the February and March editions of the Index, project-start performance remained slow across the sector throughout the first quarter, amid price inflation and economic uncertainty. This protracted period of depression is emphasised through the 46% year-on-year value decline, as climbing interest rates make public and private investors cautious about committing to new projects. Allan Willen, economic director at Glenigan, said: “Poor construction performance in the three months to March is disappointing but unsurprising, with a continued slowdown in project starts reflecting the UK’s stagnant economic situation. Despite the chancellor’s confirmation that we are not entering a recession in last month’s Budget, the UK economic outlook remains weak. Investor and consumer confidence is at a low ebb, which has inevitably stalled private sector activity. “Public sector starts have also disappointed, reflecting capital under-spending by a number of government departments during the last financial year. However, the chancellor also used the Spring Statement as an opportunity to bring forward some of these underspent funds to the new financial year. This is potentially good news for those contractors specialising in critical infrastructure, where this money will likely be committed, helping to boost the industry through greater investment in mega-projects and transport upgrades throughout the rest of 2023.” Sector breakdown Residential Residential construction starts fell by 39% in Q1 to stand 51% lower than a year ago. Private housing performance was particularly weak, finishing 39% down against the preceding three months and by half compared with the previous year. Social housing also dropped back, down 41% against the previous three-month period, and down 52% on 2022 levels. Non-residential The value of starts across non-residential sectors fell by a 33% during the three months to March, finishing 42% lower than 2022 figures. All sectors experienced a decline against the preceding three-month period. Industrial performance was especially poor, with project-starts weakening by 50% during Q1 to stand 64% lower than a year ago. Retail also fared poorly, with the value of project starts falling by 32% against the preceding three months and 48% against the previous year. It was a similar story for offices, stumbling after a flurry of activity in Q4 2022. The value of underlying project starts fell by 32% during Q1 to stand 40% down on a year ago. Health project starts declined by 36% against the preceding three months to stand 42% down on the year before. Hotel and leisure and community and amenity decreased by 44% and 5% against the preceding three months, to stand 40% and 19% down on the previous year, respectively. Education starts fell down 5% against the preceding three months but increased a modest 4% on 2022 levels. Civil engineering work starting on site dropped by 28% against the preceding three months to stand 29% down on a year ago. Infrastructure starts dropped by 43% against the preceding three-month period, down 49% on the previous year’s figures. However, this was partly offset by utilities activity, which only declined by 3% in Q1 2023 and finished 23% up on a year ago. Regional differences Regional performance was poor, with project starts weakening across all areas of the UK during the quarter. Yorkshire & the Humber suffered the heaviest fall, declining by 57% during Q1 to stand 65% down on a year ago. It was a similar story in the South East, with the value of project-starts decreasing by 48% against the preceding three months and remaining 52% down on the previous year. Faltering on its strong performance in recent months, project starts in the North East experienced a sharp fall against both the preceding three months (-46%) and the previous year (-41%). London and the South West weakened against the preceding three months, falling by 28% and 24%, respectively. Both regions were down on the previous year, remaining 42% and 31% lower than a year ago. Some areas of the UK fared even worse, including Scotland, where the value of project-starts fell by 48% against the preceding three months to stand 56% down on a year ago. This was also the case in the East Midlands, West Midlands, Wales, Northern Ireland and the North West, which all crashed compared to both the preceding three months and previous year. To send feedback, e-mail julia.cahill@eg.co.uk or tweet @EGJuliaC or @EGPropertyNews Photo © Syaibatul Hamdi/Pixabay