London and the South East remain the key drivers of UK construction activity

Glenigan data show that underlying construction starts in the UK increased by 5% over 2012, this gain in starts was driven to a large extent by the two largest regions we track; London and South East which saw project starts increase by 7% from 2011 to £11.8bn. 

London and the South East exemplify the trend seen last year across the UK as a whole; strong private sector starts that were dragged lower by public sector weakness. The revival in private housing starts recorded last year, up 35% for the UK as a whole, was heavily concentrated in London and the South East, the two regions accounted for just over a third of all underlying starts in 2012.

The two regions are of even greater importance for the office sector; nationally underlying starts in the sector were up nearly 40% last year. Office starts in the Capital accounted for almost half of the new projects that were recorded last year, highlighting the importance of London as an international destination for commercial property construction and investment. Office starts in the South East also saw gains during 2012.

The positive industry performance Glenigan recorded in 2012 looks set to continue into 2013 and beyond; for underlying work both planning approvals and the value of main contracts awarded were strong last year, both increased by 10% compared to 2011.

While underlying starts were strong last year a decline in major projects, those valued at over £100m was recorded; the value of such projects in London and the South East declined from £6.6bn in 2011 to £4.2bn last year. However the prospects for major projects do look bright; planning approvals for major projects were up by 75% last year reaching £25bn, and the value of main contracts awarded for major projects doubled in the two regions last year to £10bn. 

The strength in planning approvals and contract awards will see a continuation of 2012’s strength over the next few years; project starts will continue to be strong in those sectors that have already seen gains; the private housing and office sectors especially. Last year did see some weakness in civil engineering starts, but this was more down to the high level of starts recorded in 2011. The outlook for our two civil engineering sectors in the regions also looks positive, strong gains in planning approvals and contract awards were recorded last year and both regions should see gains in the value of civils starts in the next 18 months.