The Glenigan Index, which covers the value of projects starting on site from September to November this year, is up 9% compared with the same period in 2012 and is based on extensive research of every construction project starting in the UK over the previous three-month period and provides an indicator of developing activity in the industry.
Utilities projects drive growth in civil engineering
Civil engineering has been one of the fastest growing sectors in 2013 in terms of underlying projects starts, with the sector enjoying double digit growth since August. This continued during the three months to November, with starts 28% higher than a year ago. Growth has been driven by a 61% rise in utilities projects, while infrastructure projects were slightly up on a year ago.
Office and retail starts have risen
Glenigan data points to a slight moderation in the growth of private sector non-residential projects. Office and retail starts have continued to increase, up by 42% and 54% respectively. However, following recent strong growth, the rise in industrial project starts has slowed, now just 9% up on a year ago.
Hotel and leisure not so encouraging
Hotel and leisure starts lagged these other sectors during the second half of 2013 and fell back further, down by 39%.
Great news ahead for the private sector
Allan Wilén, Economics Director at Glenigan, believes private sector construction will be the strongest driver of growth in project starts over the next year.
He said: “Private sector growth is key to a sustained recovery in construction activity, with double digit growth forecast for the office, industrial, retail and hotel and leisure sectors.
“Last month’s Index indicated that private non-residential construction has already begun to pick up alongside improvements in business sentiment. The economic brightening has continued and recent figures show an improvement in business lending.”
Project starts in non-residential sectors that are more dependent on public funding increased during the three months to November, with education starts up by 15% and health starts by 3% year on year.
This modest upturn in health starts bucks a declining long term trend caused by constrained NHS capital funding. However, Glenigan predicts further decreases of sector activity during 2014. The Index also saw continued declines in starts of community and amenity projects.
Education sector has excelled during 2013
By contrast, education has been the fastest growing sector during 2013, as the flow of government funding has increased through a range of initiatives.
“Low levels of government spending will be less of a drag on growth of overall non-residential activity than in recent years,” Allan said.
“Starts of health projects are expected to continue a long term trend of decline; however this will be offset by a large increase in funding for school renovation and new build projects through the Priority Schools Building Programme.”
Residential news
Starts of residential projects increased in the three months to November, up by 5% in value compared to the same three months of 2012. Surprisingly, this growth was driven by a strong upturn in starts of social housing projects rather than private housing starts.
Regional indicators
The wide based upturn in new project starts is taking hold across the UK, with project starts increasing across most regions.
Starts have grown strongly in Northern Ireland during the three months to November - over double the value of a year ago and the highest level since May 2011. There was also a marked improvement in starts in Yorkshire & the Humber after the drop in starts seen during the third quarter.
The North East, East of England and Wales were the only parts of the country to see a drop in project starts against the same three months a year ago.
Allan said: “The results of this month’s Glenigan Index are a further indication that the construction recovery is spreading beyond the housing market, and London and the South East.
Roll on 2014!
“Every UK region is forecast to see an increase in project starts during the first quarter of 2014.”
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