Construction industry catches its breath during final quarter of 2014

• Glenigan Index for January finds construction growth flat on a year earlier.
• Civil engineering project starts fall by 14% against a strong 2013 base.
• Private housing activity up 7% in Q4, with a 15% year on year increase for 2014 as a whole. However continuing declines in social housing render the Glenigan Residential Index flat in latest period.
• Non-residential sector up by 4% - led by double digit growth in office and industrial project starts.
• Construction starts grow by 10% in 2014 – on a par with pre-recession levels.

A rare slowdown in new civil engineering projects and a pause in residential activity saw construction growth flatline in the fourth quarter of 2014, according to the latest figures from industry analysts Glenigan.

The Glenigan Index for January, which covers the value of projects starting on site during the three months to December, is flat on a year earlier, with a 14% drop in civil engineering activity cancelling out a 4% rise in non-residential starts.

However Glenigan data suggests the industry remains in a strong position going into 2015, buoyed by growth in project starts of 10% in 2014 - matching pre-recession levels.

Allan Wilén, Economics Director at Glenigan, said: “While the industry appears to have been catching its breath during the final quarter, this should be no cause for alarm. Construction starts grew by 10% in 2014, on a par with 2007 and the fastest pace for seven years. 

“The forward pipeline is also encouraging. In contrast to the pause in starts over the last three months, the flow of projects achieving planning approval has accelerated.

“The underlying value of schemes receiving detailed approval rose by 29% on a year earlier during the three months to November. Over the first 11 months of 2014 the underlying value of schemes approved rose by 8%, following an 11% rise in 2013.”

Private housing starts are back in the black following a faltering performance in the third quarter of 2014. The sector recorded a 7% rise in the final quarter of the year, resulting in a 15% increase for 2014 as a whole.

In contrast, social housing activity continued to decline during the second half of last year, dragging down the Glenigan Residential Index. The combined value of residential starts during the fourth quarter of 2014 were flat on a year earlier, although the year as a whole saw expansion of 8%.

“Reforms to the stamp duty system announced in the Autumn Statement will give a mild boost to the housing market, which showed signs of cooling during the second half of 2014,” Wilén said.

“The changes are also likely to push average house prices higher, as stamp duty savings improve affordability. Both of these factors would support further uplifts in the rate of private housing starts during 2015, though improved household finances and greater mortgage availability will be the more critical drivers.”

The non-residential sector was the only source of growth during the final quarter, though the 4% rise overall masked divergent trends between different market areas. Overall privately financed sectors continue to fare better than those reliant on the public sector.

The office and industrial sectors both saw double digit growth compared to a year earlier, while education and community and amenity starts fell back. However exceptions to this rule include the retail sector, which has seen starts fall over both the last three months and 2014 as a whole, and the health sector which has bounced back during the second half of the year, with starts rising by 18% over the latest three months.

The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-month period, providing an indicator of developing activity and future output in the industry.

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