Glenigan Index of construction starts to end of October 2021

Supply chain issues still affecting construction output

Despite suggestions in late summer of a potential resurgence in construction output, ongoing supply chain issue are still negatively affecting performance.

Highlighting the effect of these adverse conditions, the value of underlying work commencing on-site during the three months to October declined 16% against the preceding three months on a seasonally adjusted (SA) basis, and also declined by 16% against the same period in 2020.

However, the value of underlying project starts increased in October, offering a small silver lining which should give the industry greater optimism going into 2022. It indicates the downward trajectory may well be a temporary setback opposed to long-term decline.

Taking a closer look at the figures…

Residential Sector Output Falls Back

Residential project-starts fell 22% compared with a year ago as well as 20% against both the preceding three months (SA) and the three months to October 2019.

Private housing project-starts fell 22% compared with a year ago and by a quarter against both the preceding three months (SA) and the three months to October 2019. Social housing work starting on-site fell 7% against the preceding three months (SA) to stand 20% lower than a year ago. Social housing project-starts were only 4% lower than the same period in 2019.

The ongoing global shortage of building materials will have put considerable pressure on housebuilding, causing start delays nationwide. Whilst this persists, it will continue to have a negative impact on the residential sector.

Non-Residential Sector Remains Resilient

Although non-residential work starting on-site fell 6% against the preceding three months (SA), the value increased 1% against the previous year and was unchanged compared with the same period in 2019.

Taking a deeper dive into the results, industrial project-starts performed very strongly having increased 41% against the preceding three months (SA) to stand 38% higher than the previous year. Industrial work starting on-site also climbed 27% against the same period in 2019.

The value of office construction-starts was also high, having increased 23% compared with a year ago and 39% against the three months to October 2019. Furthermore, office project-starts climbed 8% against the preceding three-month period (SA).

Retail and hotel & leisure project-starts both increased against the previous year but declined compared with both two years ago and the preceding three-month period (SA).

Despite health project-starts falling 39% against the previous year, and by almost a quarter (-24%) compared with the preceding three months (SA), health construction-starts remained high having increased 11% against the three months to October 2019.

Further both education and civil engineering project-starts continued to perform poorly. The former declined 31% compared with the preceding three months (SA) as well as 24% compared with a year ago. For civils project-starts experienced a particularly poor period declining 32% against the preceding three months (SA) to stand 43% down on a year ago.

So, although there was a degree of fluctuation within the non-residential sector, the overall figures demonstrate a degree of resilience, which will provide confidence going into 2022.

London Calling, Wales falling

London experienced the strongest three months to October for construction-starts, with the value 28% up on a year ago and 25% up on 2019 levels. Furthermore, the value increased 2% against the preceding three months on a seasonally adjusted (SA) basis.

The North West was the only other region that experienced consistent growth, with the value having climbed 3% against the preceding three months (SA) and 9% against the previous year to stand 2% higher than the same period in 2019.

Further, Yorkshire & the Humber was the only region to have achieved growth (8%) against the previous year. Despite this, project-starts fell 9% against the preceding three months (SA) as well as 14% compared with the three months to October 2019.

Project-starts performed particularly poorly in Wales, with the value having fallen by almost three-quarters (-74%) against the previous year, 51% against the preceding three months (SA) and 61% compared with 2019 levels. Project-starts also fell sharply in the East of England, North East, South West and Scotland.

Slow revival

Commenting on the latest figures, Rhys Gadsby, Senior Economist at Glenigan says: “Project-starts were very low during the three months to October. Material and supply issues affected many construction projects during the third quarter, leading to a decline to the levels experienced in the summer of 2020 when many COVID restrictions were still in place.”

He continues, “However, it appears that project-starts are potentially beginning to turn, with the value starting to increase again in October, albeit very slowly. This, coupled with an improving situation surrounding material supplies, should provide the industry with greater optimism going in 2022. However, it is likely that the ongoing shortage of labour, cost of materials and logistics issues may hold back the pace of growth over the coming months.”