Recent data from the Glenigan Construction Review report sheds light on the trends and challenges facing the industry, and what these could mean for potential property investors.

The report highlights a significant decline in construction starts during the three months leading up to October. Despite a surge in planning approvals, the construction sector has seen a consistent downturn in performance. Specifically, the average project starts, valued at £5,541 million per month, plummeted by 27% compared to the previous quarter and stood at 59% lower than the same period last year.

Main Contract Awards Also Sluggish

Not just limited to construction starts, the main contract awards also witnessed a decrease. There was a 27% dip leading up to November, with a stark 51% drop compared to the figures from 2022.

A Silver Lining in Planning Approvals

Despite the general downturn, there’s a notable increase in detailed planning approvals. In the three months up to the end of October, there was a modest 1% increase, which represents a 17% growth compared to the previous year. This indicates a potential for future growth in the sector.

Residential and Non-Residential Sectors Struggle

Residential Sector: A Steep Decline

In the residential sector, the report indicates a 23% fall in starts-on-site during the three-month period, resulting in a 30% decline year-on-year. Both private and social housing sectors saw significant downturns, with private housing down by 25% and social housing starts slipping by 30% in the three months to October.

Non-Residential Sector: Across-the-Board Decreases

All non-residential sectors also experienced a drop in the value of starts. The industrial sector was particularly hard hit, with a 32% decline over the three months and a 57% drop compared to the previous year. Retail and office start values also saw declines.

Regional Variations in Performance

The report also sheds light on regional differences in the UK:

• West Midlands and London: Both regions saw significant decreases in project starts.
• South West and South East: These regions experienced lackluster performance compared to the previous quarter and the previous year.
• East Midlands: A notable 22% decrease against the preceding three months and a 44% year-on-year decline.
• North East and East of England: Both saw considerable decreases in project starts.
• Northern Ireland and Wales: Project starts weakened significantly.
• Scotland, Yorkshire, and the Humber, and the North West: All experienced falls in project starts.

Economic Factors Affecting the Market

Allan Wilen, Glenigan’s economic director, attributed the underwhelming performance to external constraints such as high interest rates and a sluggish economy. These factors have dampened consumer and investor confidence, leading to reduced activity across the private sector.

Looking Ahead: Hope for Recovery

Despite the current challenges, there is optimism for the future. The Glenigan Construction Forecast anticipates an industry recovery in 2024, with an expected 8% growth in starts. The recent increase in planning approvals also offers a ray of hope, suggesting potential opportunities for agile contractors in the coming years.