Glenigan Index: September

Construction starts down 11% as private sector stalls

• Non-residential construction project starts down 25% year on year for the three months to September, with retail down 38%
• Private residential project remains strong with starts up 30% year on year

Review

The Glenigan Index for the three months to September shows the underlying value of UK construction project starts was 11% down on a year ago. The slowdown comes at a time when Government efforts are being refocused to stimulate private sector investment into a construction industry that remains persistently stubborn. "The only sector that showed significant positive signs was residential which continues to outperform as private sector homebuilders bring forward new sites in anticipation of improved market conditions going into the New Year." commented Allan Wilén, economics director, Glenigan.

Nationally, the provisional figures show that the underlying value of private housing starts increased by 30% during the three months to September against a year ago, as buoyant housebuilders continue to take advantage of market conditions. "In contrast the index of social housing starts for September was 5% down on a year ago as housing associations have reshaped their development programmes in response to reduced government funding. Overall residential starts were up 15% year on year for the three months to September" said Wilén.

The non-residential sector has for the year to date been a trade-off between a struggling public sector being supported by stronger private sector starts. However September's data show things may have come to a tipping point. Non-Residential starts fell 25% for the three months to September compared to the same period last year. The dramatic fall comes as starts in all non-residential sectors bar the office sector fell over the three months to September compared to the same period last year. Private sector starts have shown a particular weakness in the month's data; industrial sector starts were down 32% for the period. The hotels and leisure sector, which has performed badly all year continued its slide in September, starts were down 24% over the year for the three month period. Retail sector starts were particularly weak, down 38% compared to the same period last year. The slide in starts comes after a strong year for the sector which had been buoyed by activity from supermarket chains' expansion programmes.

Civil engineering starts also continue to be weak, down 14% for the three months to September, annually. In light of other public spending cuts the fall should not be taken as a weakness, at least not in the long term picture. Glenigan data shows there is a large amount of work in the pipeline especially in the energy, waste and transport sectors. Last year was also one of the strongest ever for UK infrastructure investment making this month's small relative reduction almost a good sign.

Rolling three month index of project starts. Excludes projects worth £100m or more. For index values, 2006 = 100.

Source: Glenigan

P-provisional; R-revised.

The next Glenigan Index will be published on 30th October 2012 for 1st November 2012 release.