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Project starts dip on referendum uncertainty

Glenigan Index - June 2016

The value of work starting on site* in the three months to May was 5% down on the same period of a year ago, according to the latest Glenigan Index. The decline was largely due to a sharp drop in project starts during May against a year ago. 

Commenting on this month’s figures, Allan Wilén, Glenigan’s Economics Director, said: “The drop in project starts during May is disappointing, even though it had been anticipated. There was a sharp decline in private sector starts during May which dragged down the three month total and suggests that developers are now delaying their commitment to new projects until after the EU referendum. This, combined with a fall in civil engineering project and a continued weakening in public sector starts, contributed to the overall decline in the index.  

“However in contrast to the current weakening in project starts, the development pipeline remains firm. Overall the value of projects securing detailed planning approval during the first five months of 2016 is 7% up on a year ago. Furthermore the strongest growth has been in areas such as private housing and office developments which have increased 23% and 13% respectively. Whilst investor nervousness is likely to dampen project starts near term, we anticipate that there will be a rise in projects going out to tender over the coming months as clients’ line up work to start on site. 

“Accordingly, the second half of 2016 could see a sharp rise in activity as private investors press ahead with projects once the issue of EU membership has been resolved.”

The regional pattern of project starts has been mixed. The North East, North West, West Midlands and Scotland all saw starts slip back after the positive performance recorded in the previous survey. Project stats in the East of England, South West and Yorkshire & the Humber were up on a year earlier, while starts in the capital were virtually unchanged.