Construction industry returns to growth

Published:  19 September, 2011

LONDON: New Glenigan data shows that the construction industry has seen a 6% year on year increase in the underlying value of projects starting on site.

Growth in utilities, industrial, office, private and social housing project starts all contributed to the first growth seen by the industry in a year.

"A poor August 2010 signalled the end of the 2010's construction recovery. The construction industry has seen a decline in year on year project starts since that time due to public sector cuts and weak private sector investment. While the return to growth is a positive sign, it is modest growth from a low base," commented James Abraham, economist, Glenigan.

The most significant increase was in the utilities sector which grew by 24% with several renewable energy projects starting on site including a £28m scheme contracted to Solarbright to install photovoltaic panels on circa 2000 council owned housing properties and 5 operational properties in Colchester.

"As reported by the CBI in their August Industrial Trends survey, UK manufacturers are enjoying healthy order books and improving expectations for the future," said Mr Abraham. "In line with this increase in sentiment, Glenigan recorded a 15% increase in the underlying value of planning approvals over the six months to July, compared to the same period of 2010.

"In addition, the ONS reported an increase in investment by private sector manufacturing firms in new building work over the first quarter of the year. This has fed through to a growth in project starts - 36% over the three months to August compared to a year ago. Though the increase is amplified by the comparison to a poor August 2010, we expect industrial building to remain a growing part of the construction industry over the next few months."

The decline in private housing which has dominated 2011 has bottomed out with modest growth of 1% for the three months to August. Refurbishment projects, including a £50m project in Kent, continue to drive growth in social housing projects with 11% growth for the three months to August.

"New build social housing projects will continue to fall due to Government cuts, while Glenigan expects private housing starts to stabilise over the coming months," commented Mr Abraham.

Regionally the South East and South West saw the most significant growth, with the East Midlands, West Midlands, Yorkshire and Wales all seeing annual growth of over 10%. In stark contrast the underlying value of project starts in Scotland fell by nearly a third.

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