Glenigan Index of construction starts to end of December 2023

Construction starts edge higher during last quarter of 2023

• Underlying project-starts experienced a slight upturn during the final quarter of 2023, increasing 4% on the preceding three months when seasonally adjusted
• The value of work starting on-site fell a fifth compared to last year
• Residential construction starts increased 14% on the preceding three months but dropped 8% on 2022 figures
• Non-residential project-starts fell 10% during Q.4 2023, down 34% on 2022 figures
• Civil engineering work starting on-site were down 4% compared with the preceding three-month period, and 26% down against the previous year

2024 commences on a slightly more positive note, following a universally grim 2023. Seasonal factors helped drag the value of project-starts down during the final three months of the year. However, when seasonally adjusted, starts actually rose 4%, compared to Q.3.

Even more encouragingly, some verticals rallied, especially private residential construction, which contributed to 14% overall residential sector increase in Q.4. In the non-residential realm, the community and amenity, hotel and leisure, and retail categories also posted strong results during the Index period.

However, this good news was somewhat tempered as overall starts nose-dived against last year, down 20% on 2022 figures. All other vertical performance was weak, with most non-residential project-starts falling a third overall on a year ago.

Commenting on the picture painted at the year’s outset, Glenigan’s Economic Director, Allan Wilen says, “As expected, seasonal factors affected work commencing on-site during the final quarter of the year. However, after adjusting for the Christmas wind-down, starts managed to edge slightly higher during these three months. This was partly driven by a modest rise in private housing projects, indicating that developers may be entering the New Year with renewed confidence.

“Less encouraging were the declines in non-residential and civil engineering project-starts, which have continued to weaken. This suggests the construction sector can expect tough times in the near term. It means March’s Spring Budget will be hotly anticipated. Many contractors will be expecting the Government, especially in an election year, to clarify or update on the big infrastructure projects put forward in 2023, particularly following the rollback on HS2 plans last year, as part of a wider package to kick-start activity.”

Taking a closer look at the sector verticals and regional outlook…

Sector Analysis – Residential

Residential construction starts increased 14% during Q.4 2023 but stood 8% lower than a year ago.

Whilst private housing increased 19% against the preceding three months, starts were 9% weaker than 2022 levels.

Social housing performed poorly on both counts, with work starting on-site falling 2% against the preceding quarter, standing 5% down on the previous year.

Sector Analysis – Non-Residential

Performance in non-residential verticals was something of a curate’s egg. Surprisingly, community and amenity starts experienced a period of strong performance, with the value of underlying project-starts rising 6% against the preceding quarter, 28% higher than a year ago.

Retail starts also had a positive Q.4, growing 20% against the preceding three months, and 6% against the previous year.

Hotel and leisure increased by a whopping 119% against the preceding three months but fell back 26% against the previous year.

Performance was poor across the remaining verticals, with industrial and office projects both slipping back 48% compared with the year before. Both verticals also declined against the preceding three-month period, dropping 20% and 17%, respectively.

Education project-starts also suffered, decreasing 24% during Q.4 2023 to stand 22% lower than a year ago.

It was a similar story for health starts which fell back 37% against the preceding three months to stand 41% lower than 2022 levels.

Civils performance slipped back 4% in Q.4 2023, to sit 26% down on a year ago. This can be attributed to a significant drop in infrastructure starts, which tumbled 30% against last year and 6% against the preceding three months. Utilities starts remained flat against the preceding three-month period, standing 17% down against the previous year.

Regional Analysis

Regional performance was mixed. London stood out, with project-starts increasing 29% during Q.4 despite falling back 11% on the same period in 2022. The South East also experienced relatively strong growth, increasing by 16% against the preceding three months but declining 29% on 2022 levels.

The West Midlands and North East both performed well, with the value of starts increasing 11% and 31% during Q.4 2023 to stand 16% and 14% up, respectively, against the previous year.

The East of England experienced a poor performance, with the value of starts decreasing 11% against the preceding three months and remaining 32% down against the previous year.

The value of starts in the South West declined against both the preceding three-month period and the previous year, falling back 5% and 4%, respectively.

Scotland remained flat against the preceding quarter but stood 14% down on the previous year.

Some areas of the UK performed particularly poorly, including Northern Ireland and the East Midlands where the value of projects fell 39% and 51% on a year ago. This was also the case in Wales, Yorkshire & the Humber, and the North West which also suffered falls in project-starts against 2022 levels.