Glenigan Index shows UK construction starts drop 7 percent

Published:  02 May, 2013

The Glenigan Index, a UK barometer of construction starts, has shown another monthly drop in new building projects. For the last three months (February, March and April), figures have fallen by 7 percent compared to 2012.

However, April saw a marked improvement in a number of sectors. Underlying starts in the civil engineering sector increased compared to last year; starts were up 9 percent in the infrastructure sector and 17 percent in the utilities sector compared to 2012. Education starts also increased over the last month, up 15% compared to the same time last year.

“While the overall index declined in April, there was a marked improvement in project starts for some sectors,” said Glenigan economist Andrew Whiffin. “Gains in infrastructure starts were driven by road and rail projects in London and the South East, and renewable energy projects pushed up starts in the utilities sector, with wind farms in Scotland and Wales providing the largest boost.

“The gains seen in some sectors this month are encouraging signs, especially in light of the poor project starts during the first quarter and official data showing industry output fell 6 percent compared to the first quarter of last year. However, it was still another disappointing month overall.”

Housing starts were weak once again in April, down 7 percent from a year ago, although the pace of decline in the private housing sector did slow.

Mr Whiffin commented: “The housing slowdown is likely in reaction to recent lending data that shows levels of mortgage approvals in the first quarter of the year are failing to surpass levels seen in 2012, despite new government support for homebuyers.”

The industrial sector witnessed a poor performance in the first quarter of the year; underlying starts were 42 percent lower than the first quarter of 2012. However, April saw a turnaround in the sector’s fortunes with underlying starts 6 percent up on the three months to April last year. The start of a factory project related to production of wind turbine components helped boost starts for the sector in the North East.

Education starts have performed well since the start of the year – the sector has benefited from gains in refurbishment projects while newbuilds have remained firm. Further refurbishment work is due to come later in the year as the first tranche of Priority Schools Building Programme projects start on site.

Although there was a marked improvement during April, many parts of the UK are still seeing steep declines in the value of underlying project starts. Northern Ireland and Wales saw the steepest declines in underlying starts, both down by 30 percent in the three months to April. In Northern Ireland, private housing starts have all but disappeared and weakness from publicly financed sectors also pushed starts lower.

Yorkshire and the Humber was the best performing region, with underlying starts increasing by 15 percent. Private sector strength drove the gains with strong retail and industrial starts.

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