Glenigan Index of construction starts to end of December 2021

UK construction witnesses weak finish to 2021

• The value of underlying work commencing on-site during the fourth quarter of 2021 fell 18% against the previous year and 7% compared with the preceding quarter.
• Residential construction-starts fell 1% against the preceding quarter and experienced the sharpest decline compared with a year ago (-24%).
• Non-residential work starting on-site fell 11% against the previous year as well as 14% compared with the preceding quarter.
• Civil engineering project-starts fell 3% against the previous quarter to stand 16% lower than a year ago.

Entering 2022, there’s considerable room for improvement. Whilst Q.4 of the year is typically weak, project starts performed particularly poorly. During December they were extremely low, dipping to a level not seen since 2010.

Global material and labour shortages, which have had a seismic effect on the industry are a root cause of this situation. Upsetting schedules of commenced projects, it has delayed many sites which have already committed shovel to ground. That’s not to mention contracts yet to start on site.

Sector Analysis - Residential

Taking a sanguine look at the residential sector, work starting on site fell by almost a quarter (-24%) during Q.4, against the previous year. Down a mere 1% against Q.3, it hints at a modest recovery since the start of the pandemic in 2019.

Unusually, social housing was the best performing residential sector. In this vertical, project starts increased 5% compared with the previous quarter, despite being lower than a year ago.

Conversely, the value of private housing starts fell 28% against the previous year and 4% compared to Q.3.

Sector Analysis - Non-Residential

Non-residential construction had a mixed performance, having seen previously strong overall figures in Q.3 and much of Q.4. Office project starts performed particularly poorly, declining 41% against the previous three months to December, standing 30% lower than the same period in 2020.

Health and education, two predominantly public realms, also experienced decline. Healthcare starts fell by over a third (36%) against the same period in 2020, and 23% against the preceding three months. Education fell 34% and 16% against the same period respectively.

A similar, but fluid picture, was painted for civils, infrastructure and utilities, which all saw a dip in the final month of 2021. Civils starts fell 16% against 2020, 3% down on the previous quarter. Where infrastructure increased 15% on the previous quarter, its value fell by a quarter (25%) against the previous year. Utilities were also up 5% on a year ago, but down 24% against the previous year.

Regional Performance

Most areas of the UK experienced a decline, in line with Glenigan’s wider analysis. However, this should be regarded as a short-term dip, as predicted in Glenigan’s 2022-2023 Forecast, published in November 2021.

Whilst there has been a nationwide contraction, a few exceptions are indicating the long-anticipated resurgence of the sector is underway.

London and Wales both increased 16% and 14% against the preceding quarter. However, these positive lifts are tempered when taken against a 4% and 35% tumble compared to 2020 figures.

Although almost all other regions fell compared to the previous quarter, a handful were up on 2020 levels. Project starts in the North East increased 10%, and were up a massive 41% in Northern Ireland.

Decline persisted across other regions. In Scotland, the value of project starts fell 33% against the previous year and 27% against the last quarter. Arguably, Scotland was the poorest performing region across the whole of Q.4.

Project starts also fell significantly against 2020 in the East of England (-33%), South West (-27%) and the East Midlands (-23%).

Commenting on the Index, Rhys Gadsby, Glenigan's Senior Economist said: “I urge construction professionals reading these figures to appreciate them in a wider, global context. It can be very easy to adopt a pessimist position if these results are understood in a local, short-term fashion. Previous Glenigan research has indicated a strong pipeline of contract awards and planning approvals going into 2022, with our Forecast highlighting that, subject to a stabilising of external events, the sector will see a resurgence in the next 24 months.”