Infrastructure starts strengthen in June

Last Updated:

1st July 2013

The Glenigan Index for the three months to June rose by 2% compared to the three months to June 2012. Strong civil engineering starts were recorded in June; infrastructure starts were up 41% compared to the same period last year and utilities starts were 29% above the level seen last year. The gain in private housing starts seen in last month’s index was maintained in the latest data with private housing starts 12% above the level seen in June last year.

Chart 1 The West Midlands recorded the most significant improvement in the regional breakdown this month; starts were up nearly 70% compared to the three months to June last year, after a 10% rise in the previous period. Yorkshire and the Humber continued to perform well in the latest data; starts were up by 40% compared to last year, the region continues to benefit from gains in private housing and utilities projects. The South East also saw a turnaround in starts in the latest data; in the three months to June starts were up 1% after a 20% decline in the previous month, gains in private housing and infrastructure helped to boost the sector.

Starts in the East Midlands shifted to a decline in the latest data, down 34% compared to the three months to June last year. Starts in Scotland continued to be poor this month as well, down 37% compared to last year, marking the sixth straight month of decline in the region.

The recovery in private housing construction continued in June; starts in the sector were up by 12% in the three months to June compared to the same period of 2012. The sector has experienced a remarkable turnaround from the decline in starts seen during the first quarter of the year. Government efforts to stimulate borrowing for house purchase are proving effective and the Council for Mortgage Lenders reported that gross mortgage lending in May increased by 21% from April to £14.7bn, the highest monthly estimate since October 2008. Gains in the sector continue to be focussed in London and the South East. However regional hotspots do exist; Yorkshire and the Humber in particular has seen strong gains in the sector for much of 2013, a trend that continued into the latest data.

The civil engineering sectors also continued to perform well in the three months to June; infrastructure and utilities both saw strong gains, up 41% and 29% respectively compared to the same period last year. Infrastructure in the South East benefitted from the start of a new link road between Bexhill and Hastings, a project valued at just under £100m. The South West also saw construction begin on a new bypass around the village of Kingskerswell near Torquay in Devon, a project valued at £80m. Utilities projects in the South West were also strong in our latest data, the start of a new bio-gas facility in Dorset helped push up starts in the sector, the plant will convert food waste into enough gas for roughly 5,000 homes per year. Utilities starts in Scotland were also strong in June, pre-construction work on the new A’Chruach wind farm in Argyll & Bute helped push up starts for the sector.

Table 1

Outlook

The improvement in underlying work in June and the second quarter as a whole is encouraging. Strength in private housing and civil engineering

Chart 2

Despite this, weakness is still being recorded across many sectors of the industry. The first half of 2013 has seen a dip in private non-residential project starts after strong growth last year; office, industrial and retail starts have all been lower this year. However we are forecasting a renewed strengthening in project starts in these sectors during the half of the year and in 2014. is expected to continue during the second half of the year, although a slowing in the pace of gain of civils is expected.

Health and education starts remained weak in our latest data, down 13% and 14% respectively. The outlook for the two sectors is mixed; we are forecasting an improvement in starts of education construction in the second half of the year, as projects from the priority schools programme give the sector a boost. Health starts on the other hand are expected to remain weak throughout 2013; while some private sector strength has been recorded we do not foresee it being enough to push the sector out of an overall decline for the full year.