Glenigan, one of the construction industry’s leading insight and intelligence experts, releases the May 2024 edition of its Construction Review.
The Review focuses on the three months to the end of April 2024, 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.
The latest data from Glenigan reveals protracted delays to getting shovels in the ground, with major cutbacks to construction projects amid rising borrowing costs and weak demand.
Averaging £7,211 million per month, work starting on site in the three months to the end of April decreased 10% against the preceding three months, remaining 21% lower than a year ago. Major project-starts fell dramatically, dropping 21% on the previous period and 34% compared to 2023. Underlying starts had a less pronounced decline, dipping 15% during the three months to April and only 12% on the previous year.
Commenting on the figures, Glenigan’s Economic Director, Allan Wilen says: “Project-starts are struggling to match last year’s levels, as the industry continues to be plagued by uncomfortably high interest rates. Furthermore, shrinking workloads in some key sector verticals, particularly residential construction, are holding back short-term recovery.”
This overall drop in activity was also reflected in main contract awards, which fell 16% against the previous three-month period, and 29% against 2023 levels. Digging deeper, underlying contract awards experienced a significant slump, standing 18% lower than the preceding three-month period and 35% lower than the same time last year. Similarly, major contract awards also fell, declining 16% against the preceding period and 20% compared to 2023 levels.
It was a similar story for planning approvals, down 15% against the preceding three months and 11% on a year ago. Major planning approvals fell 34% against the preceding period, with the value decreasing by 12% on last year. Underlying planning approvals dipped a modest 5% on the preceding three months, finishing 11% lower than the same period in 2023.
Allan continues: “Despite further drops in project-starts, with the UK’s recent exit from recession there are signs of an economic recovery on the horizon, which will certainly help provide a more positive outlook for the construction sector. Interest rates and high material costs, which have limited buyer activity in the residential sector, are thankfully starting to plateau. It’s laying the groundwork for agile contractors to pivot, identifying new opportunities to capitalise on a potential recovery in demand in H.2 2024/H.1 2025.”
The sector-specific and regional index, which measures underlying project performance, saw starts softening across the board. However, some commercial verticals and a handful of regions experienced an uptick in activity.
Sector Analysis – Residential
Residential starts fell 16% during the three months to the end of April, to stand 18% lower than a year ago. Private housing faltered (-14%) on the preceding period, weakening 17% compared with 2023 levels.
Social housing was the major contributor to residential-starts decline, falling 21% against the preceding three-month period and 19% on the previous year.
Sector Analysis – Non-Residential
Non-residential performance was mixed during the Index period. Offices were the stand-out vertical with starts rising against both periods, up 7% against the preceding three months to stand 8% higher than a year ago.
Hotel & leisure was also in clover, experiencing an 11% growth on the preceding quarter and year. Education was also up 9% against the preceding period, but was down on 2023 levels.
In contrast, health starts declined 22% against the preceding three months but gained 22% on the previous year. Likewise, retail dipped 9% against the preceding three months but stood 27% up against last year.
It was a gloomier picture elsewhere. Industrial projects suffered, falling 37% against the previous three months to finish 43% down on 2023 figures. Community and amenity fared even worse with starts falling 25% during the Index period and 46% against last year’s results.
Civil starts slipped back 32% and 4% on 2023 levels. This overall decline was largely due to a drop in utilities activity, with starts tumbling 41% against the preceding quarter to stand 31% down on last year.
On the other hand, infrastructure performed well, rising by a fifth against the preceding quarter and 12% up on the previous year.
Regional Performance
Performance was inconsistent across UK regions, however there were a few bright spots of activity.
Northern Ireland did particularly well, increasing 20% against the preceding three months to stand 33% up on the previous year. This can be partly attributed to a sharp boost in hotel & leisure-related work, continuing the region’s recent growth streak.
Elsewhere, the North East saw the value of starts decrease by 2%, yet increase by 38% against 2023 figures. Whilst the value of starts in the South West declined 9% on last year, it was up 12% during the Index period. the North West stumbled a 1% against the previous year and saw a modest increase of 2% in the three months to the end of April.
Elsewhere, it was nothing but decline. Wales registered the worst performance of all, seeing the value of starts compared to 2023 almost halved (-44%) and over a third (-37%) against the preceding three months. It was a similar story in the East Midlands, which registered a dismal 43% drop on last year’s figures to slump by exactly a third (-33%) when matched against the three months to April.
To varying degrees, London, South East, West Midlands, East of England, Yorkshire & Humber and Scotland, all recorded declines during the Index period and compared to 2023 levels.
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