Glenigan Index of construction starts to end of December 2020

Rising Covid-19 infections and fears of a no-deal Brexit severely impact Q4 2020 construction activity figures

• The value of underlying construction projects (under £100 million in value) starting on-site during the final quarter of 2020 was 11% lower than a year ago and 18% lower than the preceding three months on a seasonally adjusted basis.
• Residential construction work commencing on-site fell 6% against the previous year, and declined 4% against the preceding three month period. 
• The value of non-residential construction project-starts fell 16% against the previous year, but increased 2% on the preceding three months.
• In contrast to strong increases in previous months, civil engineering project-starts declined 6% against the previous year and by 12% compared to the preceding three months. 

Rhys Gadsby, Glenigan Economic Analyst, commented on this month’s figures: “Project-starts declined sharply in December, but still finished the year above the low-points during the first lockdown in the Spring.

This was partially due to a natural slowdown heading to the Christmas period, but the impending risk of a no-deal Brexit as well as rising COVID-19 cases will undoubtedly have halted many construction projects progressing to site. As a result project-starts during the final quarter were 11% lower than a year ago.

Heading into 2021, the new national lockdown should not have the same adverse effect on construction-starts as the first lockdown in the Spring of 2020, with official guidance stating that construction “is essential to keeping the country operating. 

In addition the trade agreement now secured with the European Union should help reduce concerns of potential disruptions and additional costs to materials that the industry feared towards the end of 2020.”

Sector Performance

“The value of residential project-starts during Q4 2020 fell 6% against the previous year and 4% compared to the preceding three months on a seasonally adjusted basis. The decline against the previous year was due to private housing project-starts declining 10% against the previous year. In contrast, social housing work commencing on-site climbed 11% against the previous year. Interestingly, the opposite occurred compared to the preceding three month period. While social housing project-starts declined by a fifth, private housing project-starts increased by 4%.”

“Non-residential projects commencing on-site declined 16% compared to a year ago, despite a 2% increase against the preceding three months on a seasonally adjusted basis. Most non-residential sectors experienced a decline against the previous year, including projects for the hotel & leisure sector which experienced the greatest decline of any sector during the period (58%). Hotel & leisure project-starts remained unchanged compared to the preceding three months. Retail project-starts also suffered, with a decline of 37% against the previous year and 30% compared to the preceding three months.

“In contrast, two sectors achieved good growth during the final quarter of 2020. In particular, health starts doubled against the previous year, despite a 6% fall compared to the preceding three month period. This was the greatest growth of any sector against the preceding year. Similarly, community & amenity project-starts climbed 85% against the previous year, despite a 10% fall compared to the preceding three months.

“Despite a 12% decline against the previous year, the value of industrial work commencing on-site during Q4 2020 increased by a third on the preceding three months, the highest growth of any sector against the previous three month period. 

“Civil engineering work starting on-site during the three months to December declined 6% compared to a year ago and 12% against the preceding three months (seasonally adjusted). The declines were largely influenced by infrastructure project-starts, which declined 8% against both the previous year and preceding three months. Utilities work commencing on-site suffered similarly, falling 1% against the previous year and 17% compared to the preceding three months.”

Regions

“The value of project-starts in the majority of UK regions declined against the previous year. However, a few bucked the national trend.

Project-starts in Yorkshire & the Humber experienced the greatest rise of 26% against the previous year and also increased 8% compared to the preceding three months on a seasonally adjusted basis. 

Construction starts in the South West also performed strongly against the previous year, rising 15%. This was despite an 8% decline in the value of project-starts against the preceding three months. 

The North West and North East were the only other regions to experience an increase in the value of project-starts against the previous year, with increases of 11% and 6% respectively. While project-starts increased 30% against the preceding three months in the North West, starts declined 5% in the North East compared to the previous three months. 

The South East and Wales experienced the greatest declines against the previous year, with the value of project-starts falling 28% for both regions. Project-starts also declined sharply in the East Midlands and London, declining 26% and 22% respectively.”

ENDS