Private Housebuilding Bucks Falling Construction Starts Trend

CONSTRUCTION STARTS continue to fall, tracking a consistent, downward trajectory which has persisted for over a year.

Work commencing on-site dropped 1% against the preceding 3 months to July, finishing 33% lower than 2022 figures, according to Glenigan’s Construction Index for the 3 months to the end of July 2023.

Higher inflation, fluctuating interest rates and labour shortages are to blame, Glenigan says. Performance in the remainder of H2 2023 will potentially be hindered by Parts F and L as well as the introduction of even tighter fire safety regulations, Glenigan adds.

Residential construction proved a brighter spot as starts increased over the preceding three months. This was largely due to a spike in the private residential sub-vertical.

Allan Wilen, Glenigan Economic Director

Glenigan’s Economic Director, Allan Wilen, said, “The disappointment continues as the market remains depressed, and given the unusual economic circumstances, this is hardly surprising. Uncertainty has stalled activity and many investors, public and private, are reluctant to commit to new projects. Furthermore, 12 to 18 months out from a General Election, it’s likely the incumbent Government will adopt a more cautious approach, particularly to big infrastructure, in the lead-up. This will further slow activity in the short term.

“On the other hand, it was encouraging to see that private residential construction continues to rally, suggesting developers are altering their plans after a drop in starts during H1 2023. The Home Office’s easing of visa restrictions for construction trades may also improve staff recruitment and help lift activity further in the second half of the year.”

Sector Analysis – Residential

There was an uptick in residential construction, rising by a fifth (21%) during the 3 months to the end of July, but remained 26% lower than a year ago.

Private housing, in particular, enjoyed a growth spurt, with starts increasing 40% during the period. However, this improvement was still not enough to balance-out a 26% drop on 2022 levels.

Social housing performance was weak, 25% down on the preceding 3 months and falling back 21% on 2022 levels.

Sector Analysis – Non-Residential

Performance across almost all non-residential verticals was weak. Falling 23% during the previous three months and down 38% on a year ago.

The health sector showed some signs of life, growing 23% against the preceding 3 months but remaining 25% lower than 2022.

Retail project starts remained flat against the preceding 3 months to stand 40% down on the year before.

Offices and Industrial project starts experienced a particularly poor period, both tumbling 50% and 51% compared 2022 levels, respectively and also falling 35% and 24% against the previous 3 months.

Hotel & Leisure experienced a weak period, with work starting on-site declining 22% against the preceding 3 months to stand 41% down on the previous year. Education and Community & Amenity also crashed, dropping 34% and 36% against the preceding 3 months, to stand 7% and 40% down on the previous year, respectively.

The decline in civils work continues, with starts on-site dropping 25% against the preceding 3 months to stand 46% down on a year ago. Infrastructure starts dropped 8% during the Index period, down 45% on the previous year’s figures. Utilities starts also declined 43% during the 3 months to the end of July, finishing 49% down on a year ago.

Regional Analysis

Regional performance was poor generally during the 3 months to July, compared to the previous year.

The South West and East Midlands recorded a modest increase, rising 9% and 3% on the preceding 3 months, respectively, but slipping back 32% and 37% on 2022 levels. Likewise, starts in the East of England rose 4% in the Index period, yet fell 31% compared to last year.

Wales experienced the heaviest fall, finishing 43% down on a year ago, and 30% against the previous 3 months. The North East decreased 26% compared to the previous 3 months, declining 44% on 2022.

Project starts in the South East also experienced falls against both the preceding three months (-7%) and previous year (-32%).

Yorkshire & the Humber and London weakened, falling back 4% and 15%, respectively. Both regions were down on the previous year, remaining 35% and 30% lower than a year ago.

This was also the case in the West Midlands, the North West, and Scotland, which all fell compared to both the preceding three months and the previous year.

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