Public sector weakness holds back recovery

• The headline Glenigan index unchanged compared to the three months to August last year as strong civil engineering starts and rise in private housing are offset by drop in social housing and non-residential building projects.
• Private housing starts were up 18% on a year ago.
• Non-residential building projects were 12% lower as double digit declines in the office, health and community & amenity sectors overshadowed a rise in industrial projects.
• Civil engineering remains a bright spot, being 25% up on a year ago due to an increase in infrastructure and utilities schemes. 

“The recent dip in the Glenigan Index has been disappointing. Whilst largely attributable to government spending constraints, there has also been a recent pause in the flow of private sector projects.” commented Glenigan Economics Director Allan Wilén. 

“However the latest data reveals are clear signs of renewed private sector growth. The 18% rise private housing starts is especially encouraging. Confidence in the wider housing market is improving, with the flow of mortgage approvals strengthening and housebuilders reporting increased sales, in part supported by lending schemes such as Help to Buy. The market recovery is expected to gather further momentum over the next 18 months, sustaining additional growth in private housing starts.” added Wilén.

The civil engineering sectors continued to perform well in the three months to August. A 15% rise in infrastructure projects was accompanied by a 39% rise in utilities work. Civil engineering starts are forecast to strengthen further during the second half of the year and 2014, supported by an increase in transport and energy related projects.

“The first half of 2013 saw a dip in private non-residential project starts after strong growth last year, with office, industrial and retail starts all lower than during the corresponding period of 2012. However, the current rise in industrial project starts appears to reflect improving sentiment and is forecast to be followed by a wider strengthening in project starts across these sectors during the second half of this year and in 2014.” 

“In contrast, sectors with a high reliance on public funding such as health and social housing have seen a decline in project starts;  a trend that is forecast to continue over the medium term.  However we do anticipate an improvement in education project starts during the second half of the year, as projects from the priority schools programme help boost starts and as local authorities scrabble to address the shortfall in primary school places.” commented Wilén.

Index Notes: The Glenigan index of projects starts provides a leading indicator of construction activity in the UK; it is based on data collected about every construction project begun in the previous three month period. The index includes projects that are over £100,000 for civil engineering projects, over £250,000 for office and commercial projects or more than 10 units for residential property, it also excludes any project over £100m.