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The Glenigan Index slipped back in July, reversing recent gains. The Index, covering the value of project starts during three months May to July, was 12% lower than during the same period of 2012. Strong civil engineering starts were overshadowed by drop in residential and non-residential building projects. The decline in private housing projects is especially disappointing given the previously strong performance during the Spring and early summer. In addition publicly funded sector remain under pressure, with social housing, education, health and community & amenity projects all down on a year ago. 

Chart 1: Glenigan Index

The West Midlands was the only part of the UK to record a rise in project starts, with the value of project starts 33% higher than May to July 2012. Whilst the value of project starts in London and the North West England were little changed on a year ago, other parts of the country recorded sharp double digit declines. East Midlands, the North East and Wales saw the sharpest falls, dropping by 44%, 41% and 37% respectively. In addition underlying starts fell by 27% in Yorkshire and the Humber as the recent strong flow of utilities and private housing projects petered out. Starts in Scotland remained subdued although the rate of decline moderated, with starts 8% down on a year ago. 

The recovery in private housing construction appears to have lost momentum, at least temporarily. The value of underlying project starts during the three months to July was down by almost a quarter on a year ago. Whilst the flow of project starts progressively strengthened during the course of 2012, the pattern of starts has been more volatile during the first seven months of this year. Having been being hit by poor weather at the the turn of the year, the flow of project starts had been recovering prior to this latest setback. The current dip is expected to be short-lived and appears to reflect housebuilders focussing on building out recently opened sites as market conditions gradually improve. Activity remains primarily focussed on London and the South East, although the project starts in the West Midlands were 8% up on a year ago.

Non-residential project starts were during May to July were 18% down on a year ago. Starts were dragged lower by a general weakening in publicly funded areas such as health and education. In addition, whilst prospects for the industrial and office sectors remain positive, project starts failed to match the strong sector performances seen a year ago. 

The civil engineering sectors continued to perform well in the three months to July, with a 15% rise in infrastructure projects more than offsetting a modest decline in utilities. Pojects include a £30m guided busway in Manchester and a £70m CHP power plant for Thames Water. 

Table 1: Glenigan Indices

Chart 2: Glenigan Index Forecast


The recent dip in project starts is disappointing but is expected to prove short-lived. The drop was due to a combination of the continued impact of government spending constraints and a faltering in the recovery in the private housing, industrial and office sectors. 

Confidence in the wider housing market is improving, with the flow of mortgage approvals strengthening and housebuilders reporting increases in net reservations and sales, in part supported by lending schemes such as Help to Buy. The current pause in private housing starts follows strong increases last year and renewed growth is anticipated over the next 18 months as market conditions improve further.

Similarly, 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. nditions improve further.

Those sectors with a high reliance on public funding will generally remain subdued over the medium term. However we are forecasting an improvement in education project starts during the second half of the year, as projects from the priority schools programme give the sector a boost. 

In addition civil engineering starts are forecast to strengthen further during the second half of the year and in 2014, supported by an increase in transport and energy related projects.

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