The construction sector, particularly within the residential domain, has witnessed a dramatic downturn. This trend, highlighted in Glenigan’s latest industry review, showcases deepening investor apprehension and the direct impact of economic strains on housing construction starts.
The report, focusing on the period up to the end of March 2024, scrutinises the commencement of construction projects valued at £100 million or less. The findings reveal a worrying decline. This downturn isn’t isolated but part of a continuing downward trend in construction activity.
As household budgets come under increasing pressure and economic uncertainties loom large, consumer confidence has taken a significant hit. This shaken confidence has, in turn, made investors hesitant, putting a pause on project starts across the UK as they await more stable conditions.
The socio-political turmoil and the anticipation of a general election only add to the sector’s woes, with construction starts lagging significantly behind the previous year’s figures for the third month in a row. The outlook remains bleak in the short term, as the industry struggles to find its footing amidst these challenging conditions.
Sector-Specific Impact – Residential Construction Bears the Brunt
The residential construction sector has been particularly hard-hit. In the three months leading to March, the sector saw a 27% decline in starts compared to both the previous period and the year 2023. The downturn was even more pronounced in social housing, with starts plummeting by 43% compared to the preceding three months and 40% year-on-year.
Private housing hasn’t been spared either, experiencing a 22% drop against the previous quarter and a 24% fall compared to 2023 figures. Drilon Baca, a Glenigan economist, notes, “Unsurprisingly, our latest data shows project-starts remain low, with continued economic uncertainty leading to market stagnation, prolonging delays across the industry. Like the March Index, we haven’t seen the traditional ‘spring uptick’ boost starts this month. Investor confidence is at an all-time low, resulting in a general reluctance to move projects to site. The situation is likely to persist until the autumn when a new Government is in place and conducts a long-anticipated spending review. However it’s not all doom and gloom, there are some glimmers of hope on the horizon, with a number of non-residential verticals showing signs of improvement, including Community & Amenity, retail, and health, all of which were up on last year. Regionally, Northern Ireland was the standout area, posting growth against both periods.”