Glenigan Index of construction starts to end of January 2023

• The value of underlying work starting on-site during the three months to January fell 20% against the preceding three-month period to stand 31% lower than a year ago.
• Residential construction-starts slipped back 26% on the preceding three months and 38% against the previous year.
• Non-residential project-starts fell by 18% against the preceding three months to stand 29% down on a year ago.
• Civil engineering work starting on-site declined 3% against the preceding three months but stood 5% up against the previous year.

The February Index’s key takeaway is the frustratingly slow start to the year, as construction output continues to falter amid price inflation and economic uncertainty. The newly entered recession and climbing interest rates are depressing project-starts across the sector, with a 31% decline against January 2022 figures indicating investor caution in the face of a weak economic outlook.

Commenting on the findings, Glenigan’s Economic Director, Allan Willen, says, “The weakening in project-starts at the start of the year is disappointing but unsurprising. The depressed economic landscape and a significant slowdown in the residential market is having a sizeable, negative impact on the entire sector. This downturn will, no doubt, have prompted many contractors and developers to review and postpone start dates until a greater degree of fiscal certainty returns to the market.

“Nevertheless, there are some bright spots, with civils starts up compared to last year. Hopefully, this indicates that the tides are gradually turning, particularly from the Government’s recent decision to invest in large-scale infrastructure projects throughout the rest of their term in office.”

Sector Analysis – Residential

Residential construction experienced overall decline in the three months to January as starts fell 26% to stand 38% lower than a year ago.

Private housing experienced a weak period, 34% down compared with the previous year and 28% lower than the preceding three months. Social housing also had a steep fall, with work starting on site dropping 21% against the previous three months and plummeting 49% on 2022 levels.

Sector Analysis – Non-Residential

Almost all non-residential sectors experienced poor performance. Hotel & leisure and health were the only sectors to advance against the previous three months, rising 16% respectively, but failed to increase against last year.

Industrial project-starts were particularly weak, declining 34% during the three months to January to finish 45% lower than a year ago. Retail also fared poorly, with the value of project-starts falling back 29% against the preceding three-month period and 33% against the previous year.

Education project-starts slipped back 19% against the preceding three months to stand 31% down on the year before.

It was a similar story for office-starts, which had previously experienced a burst of activity, with the value of underlying project-starts tumbling 26% against the preceding three months to stand 7% down on the same time last year.

Community & Amenity also suffered, down 27% against the three months to January and 26% compared to 2022 figures.

Civils performance slipped back 3% but experienced a modest 5% increase against the year before. Utilities starts fell back 8% against the preceding three months but were, encouragingly, 26% up on a year ago. In contrast, infrastructure starts declined 4% on the previous year and remained flat against the preceding three months.

Regional Analysis

Regional performance was poor. However, the North East performed relatively well compared to the rest of the UK, with project-starts increasing 20% during the three months to January but faltering on a year ago with a 16% decrease.

Likewise in the South East, the value of project-starts increased 19% against the preceding three months but remained significantly behind the previous year’s results.

London and the South West performed particularly poorly against the preceding three months, falling back 23% and 24%, respectively. Both regions were down on the previous year, remaining 36% and 39% lower than a year ago.

Scotland suffered heavy falls in project-starts, declining 45% against the previous three months to stand 42% down on a year ago. This was also the case in the East Midlands, West Midlands, and the North West which all crashed compared to the preceding three months and last year’s performance.