The Glenigan Index February 2017

• Starts in the three months to February were 1% lower than a year ago.

• Non-residential project starts were 13% ahead of the same period in 2016,supported by a renewed strengthening in industrial, commercial and hotel & leisure projects;

• Residential starts were 1% lower on a year ago, as a weakening in private housing projects starts was largely offset by a rise in social housing projects.

• Civil engineering starts were 44% lower than a year ago.

The decrease in the index is disappointing. However this is in large part due to a sharp drop in civil engineering projects. The flow of non-residential starts is more encouraging, suggesting that investor confidence has begun to stabilise.Recent months have seen a marked improvement in the social housing sector, with the value of project starts during the three months to February was 17% higher than a year ago. In contrast private residential starts for March were 8% down on a year ago. Looking ahead higher inflation is set to squeeze household spending and to dampen activity in the wider housing market over the coming year. Against this weaker market background we anticipate a softening in private project starts during the second half of 2017.”

Non-residential projects were 13% up on a year ago. There has been a marked improvement in private sector activity, suggesting the investor confidence is recovering from the heighted uncertainty seen in the immediate aftermath of the EU referendum vote. The industrial, office and hotel & leisure sectors all saw a marked improvement in the value of underlying project starts during three months to February. In addition non-residential starts were also boosted by increases in health and community amenity work.

Civil engineering continues to be a drag on underlying project starts, being 44% down on a year ago, with the utilities sector suffering more than the infrastructure sector.”

At a regional level, the east midlands, north east and south west of England, Wales and Northern Ireland all enjoyed a strengthening in project starts, with starts increasing by 6%, 51%, 27%, 65% and 42% respectively against a year earlier. In contrast, project starts in the capital were little changed on a year ago and were 9% and 19% lower in the south east and east of England respectively. Projects starts were also weaker in the north west (-20%), west midlands (4%) and Yorkshire & the Humber (-4%).