Growth in the UK construction industry continues to be driven by housebuilding in the capital, according to new data published by Barbour ABI.

This month’s Economic & Construction Market Review shows overall construction activity rose by 59.3% in January, with housebuilding now accounting for more than a third of all UK contracts awarded by value.

The residential sector continued to show significant growth last month, with the total value of projects awarded reaching £1.87bn, a 2% increase from December and a huge 87.7% higher than the corresponding month last year.

Of all residential contracts awarded, 36% were based in London, with key projects including the £180m Clarges Estate redevelopment in Mayfair, 500 new housing units at Granville Road worth £140m and the previously named Oakmayne Plaza and Tribeca Square £128m residential scheme in Southwark.

These latest figures highlight sustained growth in the residential construction sector, which continues to be boosted by initiatives such as the government’s Help to Buy scheme. This is also backed up by the most recent ONS Construction Output figures and positive news from developers such as Bovis Homes and Taylor Wimpey, who have reported strong trading updates this month.

Michael Dall, lead economist at Barbour ABI, said: “Residential construction has been a major factor in the growth of the UK construction industry over the past year, so it’s no surprise to see that the sector now accounts for more than a third of all contracts awarded.

“It’s clear that government initiatives such as Help to Buy and record low interest rates are having a positive impact, but there is still concern that demand for new homes far outstrips the rate at which houses are coming onto the market.

“This month, the Labour Party outlined proposals to build at least 200,000 homes a year by 2020, and the issue is likely to be high on the agenda for all political parties as we head into the next election. Hopefully the sector’s prolonged resurgence will help to drive wider economic growth as we look forward to the second quarter of 2014.”