Public sector cuts outpace private sector construction growth

• Construction project starts fall 6% for the 3 months to May
• Office; retail and industrial building increases but not enough to counter falls in education and health construction
• Yorkshire & The Humber; East and North East of England saw falls of over 20% in construction project starts

Review

The underlying value of construction projects starting on site in the three months to May fell 6% year on year according to the Glenigan Index for May. 

“Private sector activity has increased but not enough to counter public sector cuts. This was the first year on year  decline we have seen this year” said James Abraham, economist, Glenigan.

Non-residential construction fell 2% year on year. “Office and industrial building are gaining momentum. Retail continues to see a high level of investment, largely from supermarket chains. This private sector growth was not enough to overcome the fall in health, education and community & amenity projects.

Residential construction fell 5% year on year as the 6% increase in private housing project starts was outweighed by an 18% decline in social housing activity.

Forecast

According to the latest Glenigan Index forecast the underlying value of construction projects starting on site will remain below that seen in quarter one of this year into 2014. 

“We are seeing an increase in refurbishment projects such as the £2.4bn Priority Schools programme as a lack of government funds for new builds necessitates spending on refurbishing the current stock of buildings” commented Abraham.

Rolling three month index of project starts. Excludes projects worth £100m or more. For index values, 2006 = 100.

Source: Glenigan

P-provisional; R-revised.

The next Glenigan Index will be published on 29th June 2012 for 2nd July 2012 release.