Glenigan Index of construction starts to end of March 2022

Uptick in project-starts hindered by rising material and energy costs

• Seasonal uptick in project-starts stalled by rising material and energy prices
• Value of underlying (less than £100million in value) construction work on-site falls 7% in Q1 2022
• Residential project-starts struggle, falling 5% during Q1, down a third on a year ago
• Non-residential work on-site sees uplift, increasing 2% against previous year but falls 2% against previous quarter
• Steep decline for civil engineering project-starts, falling 31% on preceding quarter and 38% on same time a year ago

Persistent rises in building material costs, coupled with inflation pressures, have negatively affected the traditional project-start ‘spring uptick’.

These ongoing supply chain issues have been further exacerbated by external influences, including the ongoing Russia-Ukraine War, stymieing growth and delaying forecast sector-wide recovery in the immediate future.

Against this disruption, starts were considerably lower than a year ago (22%), slipping back 7% on the previous three months (seasonally adjusted).

Residential Decline

Residential struggled to improve on performance against the previous quarter, with the value of residential work falling 5% during Q1 2022 and was down 32% on the previous year.

Whilst there was a more optimistic outlook for private housing project-starts (-2%), witnessing a modest decline compared with the last quarter, figures were still 37% lower than a year ago.

Social housing project-starts fared worse, dropping 12% against the previous quarter and down 13% against the same period last year.

Offices on the Rise

In the non-residential sector it was a mixed-bag in performance terms.

Office project-starts saw the greatest increase of any vertical over the past three months, increasing by over a quarter (28%) to stand 1% higher than a year ago. Education also saw a growth uplift, increasing 6% during Q1 2022, despite being down 9% on a year ago.

These were the only verticals to see growth against the last quarter.

Hotel and leisure project-starts fell by more than a fifth (-21%) during the quarter, despite growing 35% in the three months to January (as reported in Glenigan’s March Index). However, there was a value-increase of 11% against the previous year.

Industrial starts remained consistent with no growth against the previous quarter, but increased by over a fifth (22%) against the same period in 2021.

Civil works continued its downward trajectory, performing poorly during Q.1 2022. The value of project-starts fell by nearly a third on the previous quarter (31%), 38% lower than a year ago. A main driver for this was the poor performance by utilities, with work starting on-site dropping more than half (-52%) against the previous quarter, and -46% on last year.

Despite March’s Index indicating green shoots of recovery for infrastructure construction starts, it was down 16% against the last three months and by more than a third (-34%) on the same time period a year ago.

Regional Outlook

The North East maintained its position as the best performing region in the country, owing much of its strong performance to a number of projects coming online, including an £11 million office development in Middlesbrough. Work starting on-site was up 4% on a year ago and by over a fifth on the previous quarter (22%).

The outlook in Northern Ireland was also optimistic, which saw the UK’s greatest increase in project-starts against the previous year, up 29%. There was also an 18% rise on project-starts during Q1.

Wales also saw growth, reflecting major development plans including 269 residential units in Caldicot worth £45 million. It was also the only other area of the UK to experience project start growth against both the preceding quarter (10%) and previous year (3%).

The East of England saw project-starts rise by nearly a fifth (21%) during Q1 2022 but this was 17% lower compared to a year ago. A similar picture was painted in Scotland, rising 14% against the preceding three months, but down by 27% against the previous year.

The East Midlands and Yorkshire & the Humber also saw growth against the preceding quarter by 1% and 7%, respectively.

Commenting on the Index’s findings, Glenigan’s Senior Economist, Rhys Gadsby said, “At this point in the year, it’s normal to see an uplift in project-starts across the board, but outside influences such as choked supply chains and rising energy costs are preventing projects from getting off the ground on the level they should be. 

“Despite the challenges the construction industry is facing, there’s some real glimmers of hope, particularly on a regional level, where the North East continues to be a strong performer. Growth amongst Northern Ireland, Scotland and Wales against the past three months also show signs of gradual sector recovery.

“It will be a while until the full impact of current world events is fully realised but I have no doubts that the resilience of UK construction can weather the storm, no matter what lies in store.”