Glenigan Index of construction starts to end of October 2023

The latest Glenigan Index of construction starts reports a universal decline across the sector.

• The value of underlying work starting on-site during the three months to October fell 25% against the preceding three-month period to stand 35% lower than a year ago.
• Residential construction-starts decreased 23% on the preceding three months and stood 30% down against the previous year.
• Non-residential project-starts fell by 29% against the preceding three months to stand 42% down on a year ago.
• Civil engineering work starting on-site decreased 18% against the preceding three months to stand 36% down against the previous year.

The November Index shows the sector is continuing to spiral downwards, with the overall value of work commencing on site falling by a quarter compared to the previous three months, finishing 35% lower than 2022 levels.

In fact, performance in the November Index was so poor that not one vertical registered an uptick in activity, either against the preceding three months to October or last year’s figures, representing a universal decline.

No doubt the unusual blend of ongoing global economic pressures and persistent political uncertainty on the home front is continuing to dent investor and consumer confidence, stifling short-term recovery. The recent policy U-turn on HS2 will have also been a contributing factor to a sudden dip in previously resurgent verticals, particularly civils and residential.

Commenting on the lacklustre results, Allan Wilen, Glenigan’s Economic Director, says, “The November Index will make for disappointing reading as previous editions hinted that green shoots of recovery were starting to poke through. Frustratingly, high interest rates and a weak economy continue to depress the market, reducing the appetite to commence projects until markets stabilise.

“Government departments are also struggling to prioritise capital projects, despite last year’s capital underspends being rolled forward to the current financial year. Many contractors and developers have been left high and dry by the recent decision to can HS2 Phase 2. Whilst funds have been allocated to a Northern development programme, the sector is still to see what this will look like and faces the prospect of having to retender for the business all over again. However, the sector has faced tough times before, and we’re confident current headwinds will die down over the next few years.”

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

Sector Analysis – Residential

Residential starts fell significantly during the Index period, with starts down 30% on 2022 levels, falling back 23% during the preceding three months.

Drilling deeper, private housing decreased by a fifth (-22%) against the preceding three months and weakened 25% compared with the previous year. Social housing fared even worse, with performance slashed almost in half (-46%) against 2022 figures, plummeting 30% on the previous three months.

Sector Analysis – Non-Residential

Performance in non-residential verticals was dismal, painting a picture of widespread decline.

Hotel and leisure suffered the sharpest fall, dropping 68% on last year and 57% against the previous three months. Health starts also experienced a poor period, cascading by 43% compared to the preceding three months, down 34% compared to 2022 levels. Similarly, industrial project starts were 57% lower than last year, falling 32% against the previous three months.

The impact on other verticals was more modest, but still dramatic. Whilst office project-starts only dipped 8% against the preceding three months, they finished 39% down when measured against last year’s figures.

Education and community & amenity project starts decreased 28% and 5%, respectively, against the three months to the end of October, standing 21% and 24% lower than the previous year, respectively.

Whilst retail only decreased 3% against the previous three months, it declined 36% against the previous year.

Civils finished 36% down on a year ago, with work starting on site falling back by almost a fifth (-18%) compared to the preceding three months. Infrastructure decreased 15% against the preceding three months and remained 38% down on 2022 levels. Utilities starts declined by 32% against 2022 levels and 22% on the previous three months.

Regional Outlook

The West Midlands experienced a particularly poor period, with the value of project starts decreasing 27% against the preceding three months, falling 43% compared the previous year.

The Capital was also 36% down on 2022 project-start levels and 19% lower than the previous three months.

Decline in the South West was less severe (-7%) compared with the previous three months but fell by almost a third (-29%) compared to last year.

The value of project starts in the South East dropped by a quarter (-25%) when measured against the preceding three months and the previous year.

The East Midlands saw project start performance crash (-44%) when considered against 2022 levels and slashed by a fifth (-22%) compared to the preceding three months.

The North East and East of England both experienced a weak period, decreasing by 31% and 34% respectively, remaining 21% and 31% down on last year.

Northern Ireland and Wales project starts also weakened, slipping by 45% and 21%, respectively, against the preceding three months, and down 52% and 23% compared to a year ago.

Scotland stumbled -2% compared with the previous three-month period, dropping 38% compared to the previous year. Yorkshire and the Humber, and the North West also suffered falls in project starts against both the preceding three months and 2022 levels.