Glenigan, one of the construction industry’s leading insight and intelligence experts, releases the May 2023 edition of its Construction Review.
The Review focuses on the three months to the end of April 2023, covering all major (>£100m) and underlying (<£100m) projects, with all underlying figures seasonally adjusted.
It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals a unique insight into sector performance over the last 12 months.
Sector-wide, the May Review delivered disappointing results. Construction-start performance remained weak in the three months to April, as economic contraction continued to offset industry growth.
Work commencing on-site fell 13% against the preceding three months to stand 36% lower than a year ago. Main contract awards also faltered on the preceding three months’ performance, declining 10% in the three months to April to stand 28% lower than the same time last year.
On a more positive note, detailed planning approvals shot up against both the preceding quarter and the previous year, advancing 65% and 27%, respectively.
Commenting on the Review, Glenigan’s Economic Director, Allan Willen says, “Whilst recent forecasts have made for sobering reading, the dramatic uptick in detailed planning approvals should be welcomed, indicating that work is once more streaming back into the pipeline. However, with a twelfth consecutive hike in interest rates on the cards, the road to recovery is set to be a rocky one, evidenced by poor project-starts performance and another fall in main contract awards. We will have to wait for these rates to soften considerably before we see a semblance of a return to normal levels of activity.”
Planning for Revival
Growth in planning approvals on the previous quarter will be welcomed across the sector, following a weak start to the year.
Particularly, a strong pipeline of housing work is encouraging, buoyed by an uptick in upcoming major projects including a £600 million 868-unit development in Southall, London, and a £500 million 1350-unit development in Leeds. Overall, detailed planning approvals advanced 20% on the preceding three months.
Drilling down into the figures, whilst underlying residential planning approvals (projects <£100m) stalled during the three months to April, falling back 8%, and 22% compared to the previous year, major residential project approvals (>£100m) more than doubled against the previous quarter to stand an impressive 79% up against the previous year.
Other verticals also delivered positive planning approval figures, including offices and hotels & leisure.
The former, increased 8% on the preceding three months and 31% compared with last year. Once again, major project approvals were the main contributor to this growth, increasing 58% against the preceding three months and 56% compared with a year ago.
For the latter, detailed planning approvals doubled during the quarter to stand 54% up on the previous year. In this case, underlying approvals increases were a major contributor, rising 47% against the preceding three months, up 27% against the previous year. Major projects approvals also spiked, posting figures ten times higher than the previous quarter, growing 98% on a year ago.
Underlying project approvals also increased for Industrial projects, rising 35% (seasonally adjusted) on the preceding three months and 19% against the preceding year, provided a boost to the development pipeline. That’s not all, major health planning approvals posted significant growth during this period, almost quadrupling against both the previous quarter and previous year.
Finally, civil engineering detailed planning approvals more than quadrupled against the preceding quarter to stand double the value of last year’s figures. This was due to massive growth in major projects, with approvals increasing six-fold against the preceding three month-period and more than doubling on the previous year. Underlying approvals also advanced 22% during the three months to the end of April to stand 33% higher than a year ago.
Project Starts Remain Subdued
The sector-specific and regional index follows. Despite the upbeat news around overall planning approvals, the rest of the May Review paints a picture of underlying project-start decline across almost every sector vertical.
Sector Analysis – Residential
Residential starts-on-site fell back 18% during the three months to the end of April to stand 44% lower than a year ago.
Private housing was down 23% against the preceding three-month period, with starts slashed in half (-51%) compared to 2022. Likewise, social housing project starts’ performance was weak, but fell less dramatically, dipping a modest 6% against the preceding three months to stand 10% down on last year’s figures.
Sector Analysis – Non-Residential
Non-residential project-starts declined across the board, with almost all vertical performance dropping against the preceding three-month period.
Education was the only sector to experience growth during the Review period, bucking the downward trend with increases on the three months to April (+9%) and 2022 figures (+23%).
Industrial project-starts performance was particularly disappointing, with project-starts suffering a 32% fall during the three months to April to stand 46% lower than a year ago. Offices were similarly affected, with the value of underlying project-starts falling back 39% against the preceding three months, finishing 54% down on last year.
Retail also fared poorly, with the value of project-starts weakening against both the preceding three-month period and the previous year, declining 27% and 47%, respectively.
Health starts, having rallied during Q.1, also fell sharply, dropping 49% against the preceding three months, 52% down on a year ago.
Hotel & leisure (-41%) and community & amenity (-23%) starts decreased compared to the preceding three months, leaving them 32% and 41% down on the previous year, respectively.
Once again, civils performance slipped back, this time 18% lower than the preceding three months to stand 31% down on a year ago.
Regional Performance
Regional performance was dismal, with most areas of the UK experiencing a weakening in project-starts during the three months to the end of April.
Wales was the only region to experience growth against the previous year, increasing 13%, but falling back 12% against the preceding three months.
The North East suffered the heaviest decrease, falling by half during the three months to April to stand 27% down on a year ago. The South East also performed poorly, with the value of project-starts declining sharply during the three months to April to finish 42% down against the preceding three-month period and 50% lower compared to 2022.
Project-starts in London and the South West weakened, slipping back 12% and 20%, against the preceding three months respectively, to stand 32% and 43% lower than a year ago. Yorkshire & the Humber saw the value of project-starts tumble 28% against the preceding three months, remaining 38% behind 2022 levels.
Similarly, Scotland experienced a decrease against both the preceding three months and previous year, with the value of project-starts slipping back 11% and 38%.
The East of England, Northern Ireland, the East Midlands, West Midlands, and the North West all suffered significant falls in project-starts compared to the preceding three months and previous year.
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