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The Glenigan Index for the three months to October was down 1% compared to the same period a year ago. There was little change overall in underlying new construction activity over the period as the pattern of starts remains subdued in all but a few critical sectors. Following on from last month’s strong performance the private housing sector has again made up for the weakness in starts recorded across the majority of other sectors, both private and public. 

Glenigan Index October 2012The pattern of project starts across the country has been mixed as usual; the slowdown in the North of England continues as both starts in the North East and North West fell compared to last year, down 2% and 12% respectively. The East Midlands has been the best performing region in the October data, starts were up 65% compared to last year, strong starts were recorded in the private housing sector. London continued to do well with good performances from private housing and infrastructure sectors. 

Nationally the data show that private housing starts were up by 58% compared to the three months to October 2011, the sector continues to outperform as house builders anticipate increased sales as a result of improving market conditions. In particular it is expected that the Bank of England’s Funding for Lending Scheme will provide a boost to mortgage lending going into the New Year. Indeed the latest set of Bank lending data indicate that the scheme may be beginning to have some impact; mortgage lending was at a four month high in September, credit card lending soared and mortgage rates drifted downwards, all signs that point to an improvement in credit conditions for individuals. 

The sectors most reliant on public funding continued to perform badly in October; social housing starts were down 6%, education starts were down 30%, health starts down 32% and community and amenity were down 13%. Government cut backs and a lack of private sector investment incentives will continue to be the main hurdles to investment across these areas well into 2013.

Last month we saw starts in the retail sector fall by 20% after unprecedented growth for the year to date, this reversal in fortune accelerated in October, starts were 36% below the level seen last year. The sector to a large extent is being driven by the supermarket chains this year; the boom and the bust in the sector a result of their expansion programmes which are now coming to an end.

The office and commercial sector has seemingly recovered from the surprise dip in activity experienced last month, when starts fell by 4% annually. In the three months to October starts were up 27% compared to the same period last year, London and Scotland both saw good gains in starts for the sector. 

  Glenigan Index Residential Non-residential Civil engineering
  Index % Change Index % Change Index % Change Index % Change
Sep-11 92 19 72 4 94 19 137 57
Oct-11 87 15 70 -3 90 13 124 86
Nov-11 82 -1 67 -13 84 -7 118 79
Dec-11 73 6 67 3 70 -5 109 67
Jan-12 88 13 83 34 75 -13 162 72
Feb-12 95 25 86 40 84 6 166 58
Mar-12 105 12 96 23 94 -1 172 29
Apr-12  99 4 91 7 97 7 131 -10
May-12 101 -4 94 3 98 -2 132 -21
Jun-12 r 102 1 91 105  125  -18 
Jul-12 r 103 9 97 25 99 6 132 -5
Aug-12 r 96 7 95 19 92 6 117 -13
Sep-12 r 88 -4 97 32 77 -19 112 -21
Oct-12 p 87  -1  94  33  75  -16  111  -13 
Rolling three month index of project starts. Excludes projects worth £100m or more. For index values, 2006 = 100.
Source: Glenigan
P-provisional; R-revised.

Outlook

Glenigan Index Forecast - October 2012The strengthening in project starts seen during the first half of 2012 appears to have lost momentum over the summer months. Lower Government investment has, for the second month in a row, now been joined by lower private sector investment. 

However, despite the month’s apparently gloomy figures our outlook going into 2013 remains positive. We did after all expect some slowdown in the second half of 2012 based on our estimates. 

Near term cuts in government spending will continue to restrict the number of education and social housing projects coming through the development pipeline. A strengthening in civil engineering work is anticipated during 2013, with an increase in energy related utilities work. There will continue to be a high level of infrastructure investment, particularly concentrated in the south of England. This includes major projects such as Crossrail schemes that will continue to provide rail related work.