Fewer projects placed on hold during 2012 so far

The value of shelved projects has continued to fall, demonstrating strengthening confidence from certain sectors in the construction industry. 

The underlying value (excluding projects worth £100m or more) of projects being placed on hold totalled £3.9bn over the first half of 2012. That represents a 29% decline on the same period of 2011, with almost every sector seeing a falling level of shelved projects. The number of projects placed on hold fell at a quicker pace; a 37% drop over the first six months of 2012 brought the number to 970. 

Falling levels of projects being placed on hold have been seen as private sector developer’s confidence improves, while the majority of public sector postponements/cancellations – such as BSF projects – have worked through the system.

Chart 1: Value of projects placed on hold

Private housing accounted for just under quarter of the underlying value of shelved projects over the last six months. Though this is a significant proportion (though roughly similar to the proportion of project starts that private housing accounts for), the £900m worth of work represents a 37% drop in the value of projects placed on hold from the same period of 2011. 

The retail sector also saw high share of projects being placed on hold. Over the six months to June 2012, 15% of postponed projects were accounted for by that sector, as opposed to 5% of in 2011. Much of this increase in the value of shelved retail projects was due to supermarket projects in the first quarter of the year. Firms such as Tesco made statements indicating they were to slowdown on their construction of new stores, and sure enough we saw these projects postponed.

Chart 2: Value of projects put on hold during H1 2012

The value of postponed office projects increased by 2% over the first six months of - this was the only sector to see an increase apart from retail. The return to recession in the UK and the never-ending Euro-drama may have weighed on investors’ minds, but in truth the level of postponements is far below where they were two years ago. In fact, it has been suggested that the crisis in the Eurozone has led to increased flows of investment from Europe into key office properties in the UK, particularly London, in attempt to find a safe haven.