Index: Infrastructure falls make January gloomier

Chart 1: Glenigan Index

The Glenigan Index for the three months to January fell by 18% compared to January 2012 as project activity dropped off across most sectors in the first month of the year. The fall in activity was led by the infrastructure sectors, where the decline is exaggerated by a particularly strong start to 2012, when projects were scheduled to ensure preparations were ready in time for the summer’s Olympic Games.

The regional picture is particularly bleak in the January data, slowdowns in all but two of our regions were recorded. London suffered particularly badly, possibly due to last year’s Olympic related glut buoying the January 2012 data; starts were down 38% on the same period last year. The Capital saw slowdowns across a number of sectors; infrastructure, hotels and leisure, office and commercial, and both residential sectors. 

The top performing region was the West Midlands, which saw starts increase by 26%. The retail sector did particularly well in the region this month with a large new (£80m) retail project beginning in Hereford. 

Nationally the data show that starts across all sectors bar one were down over the period. Surprisingly it was the social housing sector that bucked the trend going into the new year. The sector was boosted by a number of student accommodation projects that began in January; however starts were still up only 1% compared to last January.

Private housing starts were down 4% for the period, a little disappointing considering the positive performance of the sector in the final months of last year. Despite this month’s lacklustre performance the prospects for the sector still seem to be brighter than most; there are a raft of government measures in place aimed at stimulating the housing market and borrowing conditions for homebuyers continue to ease.

The civils sector suffered particularly badly in January with infrastructure starts, the worst performing sector this month leading the fall, down 44% compared to the three months to January 2012. Utilities starts also fell, down 27% over the same period. Large falls in infrastructure starts were recorded in London and the South East compared to the same period last year, down 22% and 81% respectively, due in part to the large amount of work that got pushed through in these regions at the start of last year. Large falls were also recorded in Scotland. Utilities starts were also down across a number of regions over this period, although starts for the month were up on the December data, January 2012 was particularly strong leading to the downward trend in starts over the year.

Health and education starts also performed poorly, down 21% and 15% respectively. The office and commercial sector also took a turn for the worse slipping into decline for the three months to January, down 39% compared to the same period last year after a number of months of continuous gains.

Table 1: Glenigan Indices (large* projects up to £100 million)

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

Source: Glenigan

P-provisional; R-revised.

Outlook

Chart 2: Glenigan Index Forecast

The slow start to the year is expected to continue throughout the first quarter, we forecast that overall starts will be 13% below the level seen in the first quarter of 2012

This is not to say that performance will be poor across all sectors, as it was in the January data; we still expect the private housing sector to be better than it was in the first part of last year.

The fate of the retail sector now seems set in stone, with the loss of a number of well-known high street brands falling into administration, we do not expect activity to pick up for a foreseeable part of 2013

The education sector will benefit from the Building Schools for Future programme this year and will continue to perform in 2014 as measures outlined in this year Autumn Statement take hold.

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