Construction down 8% as snow stalls projects

Published:  15 February, 2010

LONDON: The value of construction projects starting on site in January was 8% lower than in January 2009 according to the latest Glenigan Index. Project starts were delayed by snow, with activity in the non-residential sector being particularly weak.

“Glenigan forecast a gradual recovery over the course of 2010 as private sector confidence grows, however government spending cuts will remain a drag” according to Allan Wilen, economics director, Glenigan. He continued “The industry is bracing itself for further delays with expectations of more snow and sub-zero temperatures in February.”

Housing projects recovered well during the autumn, peaking at 27% higher by value year-on-year in October 2009. New housing projects were particularly affected by the bad weather resulting in the value of projects starting on site in January 2010 being 1% lower than January 2009, despite an increase in social housing projects. 

Mr Wilen commented: “The pick-up in project starts during the autumn indicates that housebuilders are preparing to capitalise on the anticipated modest improvement in market conditions and a gradual recovery in new residential projects is forecast over the course of this year.”

He added, “Weak household earnings and consumer confidence, combined with limited mortgage availability are expected to restrict the pace of recovery in new house sales during 2010.".

New non-residential projects continue to be particularly weak due to low confidence in the private commercial and industrial sectors. There are tentative signs however that market conditions are now stabilising.

A rise in government-funded work since April 2009 helped partially offset the impact of weak private sector investment upon the non-residential index. However, a more recent drop in health and community and amenity projects contributed to the fall in the January Index. In contrast, the flow of education projects has remained firm.

Commenting on the outlook for the non-residential sector, Mr Wilen said “The forecast increase in private sector projects will be offset by Government spending cuts, making for a slow and fragile recovery over the next two years”.

Civil engineering projects slipped back in January following a surge in the autumn which saw the value of projects starts in November 2009 31% higher than November 2008 thanks to a surge in rail and road projects that has since lost momentum. 

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