Public-sector cuts outpace private-sector construction growth

Published:  03 June, 2012

UK: The underlying value of construction projects starting on site in the three months to May fell 6% year on year according to the Glenigan Index for May.

"Private-sector activity has increased but not enough to counter public-sector cuts. This was the first year-on-year decline we have seen this year," said James Abraham, economist, Glenigan.

Non-residential construction fell 2% year-on-year. "Office and industrial building are gaining momentum. Retail continues to see a high level of investment, largely from supermarket chains. This private-sector growth, however, was not enough to overcome the fall in health, education and community & amenity projects,” he said.

Residential construction fell 5% year-on-year as the 6% increase in private-housing project starts was outweighed by an 18% decline in social housing activity.

Looking forward, the Glenigan Index forecasts that the underlying value of construction projects starting on site will remain below that seen in Q1 of this year, into 2014.

"We are seeing an increase in refurbishment projects, such as the 2.4bn Priority Schools programme, as a lack of government funds for new builds necessitates spending on refurbishing the current stock of buildings," commented Mr Abraham.

On the private sector Mr Abraham said: "Private-sector prospects are in doubt given the news that the economy shrank by 0.3% in the first quarter and the on-going Euro crisis casts further doubt." The Index also predicts that infrastructure investment will continue to be strong, particularly in the south of England. It reports that Crossrail will continue to provide rail-related work, while there may begin to be a lift in spending on the road network

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