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3rd June 2013
The Glenigan Index for the three months to the end of May rose by 2% compared to the three months to May 2012. The increase in underlying project starts this month comes as the turnaround in civil engineering projects seen in April maintains momentum and both infrastructure and utilities see more projects starting on site than in May a year ago. The private housing sector also saw the value of projects starting on site increase as confidence returns to the housing sector after a poor start to the year.
Chart 1: Glenigan Index
The biggest improvement in the regional picture this month was in London; starts in the capital suffered from the weakness in civil engineering and private housing starts during the first quarter, but gains in private housing and utilities helped push starts 30% higher than the level seen in the three months to May 2012. An increase in hotels and leisure projects also helped boost starts in the region.
The South East saw starts fall by nearly 30% in the three month to the end of May, private housing has traditionally been the region’s largest sectors, and while starts in the sector remained firm in May there was nothing like the revival in growth seen by the sector in London. The South East has also seen a sharp reduction in industrial projects starting on site during 2013 a trend that has continued in our latest data.
The recovery in civil engineering starts that began last month gained momentum in our most recent data; in the three months ending May underlying starts for infrastructure and utilities projects were both over 30% higher than the same period last year. Infrastructure work in May was heavily focused on road refurbishment work as the continued improvement in weather conditions allowed work delayed during the first quarter to start on site. Utilities projects were dominated by the energy sub-sector, with renewables projects such as wind and solar accounting for much of the gains. Construction of a new sewage treatment plant in Barking also boosted the value of underlying starts for the sector this month.
Private housing starts suffered during the first quarter of the year, the combination of poor weather and weak confidence due to low levels of mortgage lending caused developers to hold back on new projects. However an improvement in the weather saw starts edge up during April and May appears to mark a resurgence in sector activity; starts increased by 15% compared to the three months ending May last year. Help to Buy has no doubt buoyed the confidence of prospective homebuyers, the first part of the scheme started in April and offers government equity loans of 20% of the value of the property; initial reports show that the scheme is already boosting sales at the larger housebuilders. The boost in demand is prompting developers to resume construction and we expect the sector to continue to perform well throughout 2013.
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