Private sector construction shows signs of recovery
Published:  22 October, 2010

BOURNEMOUTH: Private sector non-residential construction for the three months to September increased by 7% compared to the same period last year according to market intelligence firm, Glenigan.

The retail, hotel and leisure, industrial and office sectors all saw increases in the value of construction projects starting on site.

While retail and hotel construction has been strong for the past six months, industrial and office project starts have returned to growth after a sustained period of decline.

"The increase reflects improved business confidence and lending conditions. It is however from an extremely low base" said James Abraham, an economist at Glenigan.

Commenting on private housing, Mr Abraham said: "Project starts fell in the three months to September following a year of sustained growth. This recent dip highlights the fragility of the recovery.

"A temporary return to growth is anticipated at the end of the year. However, poor household earnings growth, high unemployment, limited mortgage availability and stalling house prices are likely to impact any return to growth."

Public sector construction in the three months to September was impacted by government investment cuts. Mr Abraham commented: "The value of social housing projects starting on site fell by 1% while the health sector saw a substantial fall.

“Education projects will fall back near term following the demise of the Building Schools for the Future programme. Community and amenity is the only publicly-funded sector that has a strong flow of developments in the pipeline".

Civil engineering has been earmarked as a potential source of new work over the next few years.

However, the underlying value of projects (less than £100m) starting on site in the three months to September was 13% lower than a year ago.

"The rise in utility work did not offset the lack of infrastructure projects. It is likely that a cut in the Department for Transport's budget in this month's Spending Review will severely limit prospects for next year" Mr Abraham commented.

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