Glenigan Index of construction starts to end of August 2023

The Glenigan Index of construction starts to the end of August reports weak construction-start performance tempered by a modest residential uptick

• The value of underlying starts fell 5% against the preceding three months, standing 21% lower than a year ago.
• Residential construction-starts increased 6% on the preceding three months but fell back 11% on 2022 figures.
• Non-residential project-starts fell by 22% against the preceding three months to stand 33% down on a year ago.
• Civils work starting on-site increased 3% against the preceding three months but was 29% down against the previous year.

The September Index sees construction-start performance continue to plummet. Overall, the value of underlying work starting on-site fell 5% against the preceding three months to stand 21% lower than a year ago.

Whilst modest growth in private housing and civils starts indicates slight silver linings in an otherwise overcast period, these positive results in isolated verticals are yet again tempered by poor performance across almost all other non-residential sectors.

Construction has experienced considerable disruption in recent months, and industry recovery continues to be held back by a variety of external factors including higher inflation, fluctuating interest rates, and labour shortages, creating considerable economic uncertainty.

Commenting on the findings, Glenigan’s Economic Director, Allan Wilen, says, “It’s encouraging to see the decline in project-starts has slowed during the period covered by this Index. However, increased inflationary pressures and rising interest rates have put considerable strain on the industry, suggesting we’re not out of the woods yet. Incoming regulation from the 2022 Building Safety Act in the autumn is also expected to have a significant effect, particularly in the residential market which will likely stall activity as developers invest in compliance over construction.

“However, the weight of new regulation on the residential market could be offset by the relaxing of others, particularly the rules around Nutrient Neutrality, welcomed by the sector and potentially boosting starts from Q.4 2023. The industry can also take hope from signs of individual vertical recovery, for instance, civil engineering project-starts which posted a period of slight growth against the preceding three months.”

Taking a closer look at the sector verticals and UK regions…

Sector Analysis – Residential

The overall value of residential project-starts improved during the Index period, rising 6% against the preceding quarter. However, the value remained 11% lower than the previous year. Private housing was the September Index’s stand-out performer, with work starting on-site increasing 14% compared to the preceding three months despite falling short of 2022 levels by 9%.

Conversely, social housing performed poorly, with project-starts slipping back 19% against both the preceding quarter and the previous year.

Sector Analysis – Non-Residential

Performance in non-residential sectors was generally poor.

Civil engineering was the only vertical to achieve growth against the preceding quarter (+3%), despite project-starts remaining 29% lower than a year ago. Infrastructure starts drove growth during the period, increasing 15% against the preceding three months but remaining 33% down on the previous year. However, utilities starts declined 12% against the preceding three months to stand 21% down on the year before.

Health starts experienced a mixed period, increasing 8% against the preceding three months but remaining 7% below 2022 levels. Retail followed a similar trend, with the value of project-starts increasing 33% against the preceding three months but remaining 24% down against the previous year.

The industrial vertical experienced a very poor period with the value of project-starts registering the greatest decline compared to last year (-45%), also dropping by 17% during the three months to the end of August.

It was a similar story for Hotel & Leisure, with the value of underlying project-starts falling 38% against the preceding three months and the previous year. Offices (-25%), education (-37%) and community & amenity (-37%) also posted heavy declines during the three months to August to stand 44%, 10% and 51% lower respectively than a year ago.

Regional Analysis

Regional performance was poor, with project-starts weakening across most of the UK during the three months to the end of August.

Northern Ireland saw an increase, rising 23% on the preceding three months and 80% on the previous year.

Likewise, Wales was another bright spot during the Index period, with starts shooting-up 50% during the three months to August but remaining 19% down on a year ago.

The West Midlands experienced a mixed performance, with the value of starts increasing 8% against the preceding three months but remaining 30% behind the previous year.

Project-starts in the South East remained level against both the preceding three months but were 24% down on the year before.

The North East and the East of England weakened against the preceding three months, falling back 28% and 14%, respectively. Both regions were down on the previous year, remaining 20% and 11% lower than a year ago.

Scotland also experienced a decrease against both the preceding three months (-20%) and the previous year (-24%).

Yorkshire & the Humber and the North West both suffered falls in project-starts against both the preceding three months and the ¬previous year.

This was also the case in the East Midlands (-24%), London (-10%) and the South West (-15%), which all crashed against the preceding three months and were 36%, 12% and 42% down on 2022 levels, respectively.

	Glenigan Index		Residential		Non-Residential		Civil Engineering
Month	Index	% change y-o-y	Index	% change y-o-y	Index	% change y-o-y	Index	% change y-o-y
Aug-22	191.3	10%	268.3	6%	146.2	13%	150.0	17%
Sep-22	195.8	13%	282.1	17%	148.0	10%	137.3	4%
Oct-22	193.2	15%	270.3	18%	146.6	8%	157.2	30%
Nov-22	177.1	12%	243.1	17%	136.7	7%	148.7	15%
Dec-22	147.6	12%	195.9	5%	120.1	19%	117.8	23%
Jan-23	173.9	7%	232.3	-1%	144.5	16%	121.4	14%
Feb-23	167.3	-5%	226.3	-11%	135.0	-3%	125.6	27%
Mar-23	186.8	-17%	263.1	-20%	141.7	-18%	147.3	6%
Apr-23	162.5	-24%	232.9	-27%	121.7	-19%	122.1	-25%
May-23	168.8	-25%	245.8	-29%	120.4	-15%	141.3	-35%
Jun-23	166.6	-21%	242.4	-22%	120.8	-11%	131.4	-42%
Jul-23	154.0	-21%	229.6	-19%	103.6	-24%	139.8	-26%
Aug-23	150.7	-21%	238.6	-11%	98.4	-33%	106.9	-29%

Press Contact: Allan Wilen Economics Director T: 01202 786760 E: allan.wilen@glenigan-old.thrv.uk