Glenigan predicts 4% increase for construction project starts in 2014

Figures released today (19 November) by construction intelligence providers Glenigan forecast a 4% increase in project starts for 2014, as private sector investment leads a sustained recovery in industry activity.

 

The Construction Prospects for 2014 report, prepared by Glenigan’s economics team, indicates that the value of projects receiving detailed planning approval has improved strongly in 2013 and a firm development pipeline of future projects is now in place.

 

Underlying project starts in the UK are expected to have risen by 2.5% this year due to increases in the value of civil engineering projects and an uplift in private housing. Work volumes will continue to pick up across the industry as the increase in project starts feeds into output figures.

 

Commenting on the construction outlook for next year, Allan Wilén, Economics Director at Glenigan, said: “Looking ahead to 2014, we anticipate an acceleration in construction growth, with project starts expected to increase by 4%. The private sector will be the key driver of demand in 2014 and Glenigan expects strong growth in the value of industrial, office, retail and hotel & leisure projects being brought to site.”

 

Allan added: “New project starts in these sectors contracted during the first half 2013 as economic confidence faltered; however data for the second half of the year shows a rapid growth in starts that is expected to continue through 2014.”

 

Growth will be felt across the main sectors of the industry, with starts of civil engineering and non-residential work driving expansion.

 

However, overall residential starts are forecast to slip back as continued increases of private housing starts are offset by a sharp fall in social housing due to government funding cuts.

 

Low levels of government spending will be less of a drag on non-residential work, while falling starts of health projects will be offset by a large increase in funding for school renovation and new build projects through the Priority School Building Programme.

 

Rises in office construction will be focused on major metropolitan areas, but retail and leisure project growth is likely to be more widely spread as consumer spending picks up across the country.

 

The focus of central government capital expenditure on transport will broaden from rail towards road projects and this will lead to a more even spread of infrastructure work across England.

 

The value of projects starting in the North East, North West and Northern Ireland has increased this year; however it is expected to decrease into 2014 as lower consumer purchasing power in the regions discourages investment in retail and leisure property.

 

In contrast, the value of underlying starts in London has rocketed and is expected to be up by 22% this year. This has taken the level of starts to 34% above the 2007 level and new starts are expected to remain around this high level in 2014.

 

Starts across the rest of the UK are expected to pick up, with the rise in housing market turnover and mortgage availability spurring private housing development across the UK.

 

However, cost inflation is widely expected to accelerate over the next year, which may leave contractors who have submitted highly competitive tenders vulnerable to price rises.

 

Glenigan Economist Tom Crane said: “Cash flow problems could be a key challenge, especially for small and medium sized firms.

 

“Businesses that take on extra work too fast may struggle to meet the short term costs of their rising workloads; however supply chain finance schemes introduced by several major contractors will hopefully help to alleviate this problem.”

 

“However we are forecasting an improvement in the education sector as projects from the PSBP help boost starts and local authorities address the shortfall in primary school places.”

 

To download the full Construction Prospects for 2014 report, click here.

 

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