Major projects continue to decline in 2012

• New research from Glenigan shows that for the year to October 2012 the total value of major (£100m+) project starts is down over 20% compared to the same period of 2011.
• Major infrastructure starts in 2012 are close to 50% below levels seen in 2010 as government action fails to translate into new work on the ground.

Provisional data collected by Glenigan show that the total value starts for major projects valued at over £100m for the year to October was £7.5bn, down 20 per cent compared to the same period last year. The pattern of major project starts is shadowing conditions in the wider economy and the value of major projects has been consistently in decline since 2009. 

“The continued slowdown in major projects that we have seen this year is the result of reduced capital budgets across Government departments, uncertainty regarding the PFI scheme and hesitation by the private sector to invest in large and often long term projects.” commented Glenigan Economist Andrew Whiffin.

Starts of major projects in the infrastructure (road and rail) sector hit a new post-crisis low in 2012; only £2.1bn of major infrastructure projects began in the year to October compared to £3.8bn in 2010. “Despite government attempts to promote infrastructure investment with UK Guarantees, private sector investors are unwilling to commit in the current climate when it comes complex large scale road and rail projects, and it is this that is constraining starts of major projects in the sector.” said Whiffin. 

Converse to what has been seen in the infrastructure sector starts of major utilities projects have held up relatively well, for the year to October starts were worth £3.1bn only marginally short of last year’s total of £3.3bn. Major utility project starts have been supported by the energy sector with a number of wind and waste to energy projects getting underway in 2012.

“Major projects have performed well in the utilities sector and private investor appetite into energy is especially strong, one area where activity has been absent is the nuclear space but recent developments suggest that next year could be a big year for nuclear with a number of the proposed new plants getting off the ground.”

Chart 1: Major Infrastructure and Utilities Starts