Glenigan Index of construction starts to end of January 2022

Output Decline Persists in 2022

• The value of underlying work commencing on-site (less than £100 million in value) during the three months to January fell 15% against the preceding quarter and 31% compared with a year ago.
• Residential project-starts were very weak, having declined 45% against the previous year and 20% compared with the preceding three-month period.
• Non-residential project-starts experienced the smallest declines, with the value having fallen 8% against the previous year and 10% compared with the preceding three months.
• Civil engineering project-starts fell 24% against the same period a year ago as well as 7% against the preceding three months.

The downward curve registered throughout autumn/winter 2021 persisted into 2022, with the value of underlying work commencing on site falling 15% in the three months to January against the preceding three months (Aug-Oct ’21). This is down 31% compared to the previous year.

This brings project starts to a significant low, revealing an abnormally weak January, with start value being at its lowest since the first national lockdown in spring 2020.

Persistent labour and supply chain issues are still having a negative effect on output, holding back recovery, and proving a primary reason for such poor performance. This has been further exacerbated by rising material prices and deteriorating economic prospects, prompting some clients and developers to review project costings or viability, delaying starts on site.

However, despite disappointing levels of output, this month’s Index has recorded a strong development pipeline. This offers a positive outlook for the rest of the year, should external events and challenges resolve.

Sector Specific – Residential

Similar to January’s Index’s data, the value of residential work commencing on site during the three months to January fell 45% against the previous year, and 20% compared to the preceding three months.

Although social housing project starts increased 3% on the preceding three months, the value fell 30% against the previous year.

Private housing was the worst performing sector during the period, with starts falling by nearly half (49%) against the previous year and nearly a third (28%) compared with the preceding three months.

Sector Specific – Non-Residential

Non-residential sector performance was mixed. Industrial starts, consistently the strongest performer over Q.4 of 2021, declined 18% in January against the preceding three months, but rose 44% on the previous year.

Hotel and leisure were the only sector to experience growth against both the previous year (+23%) and the preceding three months (+35%).

Other sectors continued their downward trajectory, with office starts falling 36% against the previous year and 37% against the preceding three months. A similar picture was painted in retail and health, down 17% and 21% against 2021 respectively, and dipping 8% and 14% on the previous three months.

Once again, civils work fell against the previous year (-24%) and the previous three months (-7%). Utilities fared even worse with a 36% dive on last year and 26% on the previous three-month period.

Regional Analysis

Wales stood out as the only area of the UK to see growth against the previous year (+29%) and on the preceding three months (+34%).

Although Scotland (-31%) and the South West (-27%) were down on last year, they both saw an increase on the preceding three months by 2% and 11% respectively.

The majority of regions experienced heavy declines during the three months to January. Most dramatically, project starts in the West Midlands fell 64% against the previous year as well as 42% against the preceding three-month period. Similarly, poor figures were registered in the East of England (-43%) and London (-34%), which experienced very sharp declines in work commencing on-site against the same period in the previous year.

Commenting on the Index, Rhys Gadsby, Glenigan’s Senior Economist, says, “Many will be disappointed the year hasn’t got off to a more positive start, but I would suggest a degree of optimism is in order. We are starting to see some of the socio-economic challenges gradually easing and this is being evidenced through a growing pipeline of planning approvals and main contract awards, as highlighted in our January Construction Review, published last month.”