Glenigan, one of the construction industry’s leading insight and intelligence experts, releases the December 2022 edition of its Construction Review.

This Review focuses on the three months to the end of November 2022, covering all major (>£100m) and underlying (<100m) projects, with all underlying figures seasonally adjusted.

It’s a report which provides a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals a unique insight into sector performance over the last 12 months.

The central finding of the December Review is that the fall in project-starts, consistent throughout the autumn, worsened during the three months to November as soaring material, energy, and fuel costs continue to hinder construction activity.

Main contract awards also weakened against the previous three-month period, as the fallout from the mini-budget halted economic growth and dented industry confidence.

High interest rates and inflation are likely to further constrain projects moving to site, but a 5% rise in detailed planning approvals against the preceding three months suggests that a strong development pipeline should help to turn the tide in the latter half of 2023.

Project-starts stalled

Performance-wise, the December Review is a mixed bag. In terms of construction-starts, at face value there are modest signs of improvement. Work commencing on-site increased during the three months to November, 3% up on the preceding three months and 8% higher than the previous year.

However, this growth was largely due to a significant increase in major projects (£100 million or more), which were 53% higher than the preceding three months, and 62% up on a year ago.

Scratching beneath the surface reveals a different picture altogether. Underlying work commencing on-site fell 11% against the preceding three-month period, and 7% against 2021.

The poor project-start performance in this category, which represents the majority of work undertaken in the UK, shows that as the year closes the construction sector still has far to travel on the road to recovery.

Main contract awards also performed poorly, falling 15% during the three months to November, with the value also declining 14% compared with the previous year. Underlying contract awards fared little better, tumbling 20% compared with the preceding three months and the same period in 2021. Major project contract awards declined 15% during the three months to November but, despite this dip, the value remained 10% up on the previous year.

There is some solace, with the development pipeline gradually re-finding its feet. Overall, detailed planning approvals increased 6% during the three months to November to stand 3% up on a year ago.

Drilling down into the detail, major project approvals were relatively unchanged (-3%) against the preceding three months, but increased 35% compared with a year ago. Underlying project approvals were unchanged against the preceding three-month period, but the value weakened 6% compared with 2021 figures.

Commenting on the December Review, Allan Wilen, Economics Director at Glenigan, says, “Unfortunately, this Review highlights the construction industry is still struggling under the burden of myriad external events. As if the supply chain disruption and associated material, fuel and energy inflation weren’t enough, the Government’s misjudged ‘Mini Budget’ has accelerated the UK into recession. The affect that this will have on the residential market will be significant and it’s likely private and social developers will be approaching the first half of next year with trepidation.”

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He continues, “Focusing on the industry as a whole, we can expect slow progress, which will prevent a quick recovery in project-starts. Despite this we’re starting to see evidence of a strong development pipeline, with a small uptick in planning approvals. This should, hopefully, buoy the industry in the New Year. Certainly the Autumn Statement promised a focus on major infrastructure projects which will, hopefully, start to be realised in the New Year”

The sector-specific and regional Index, which measures underlying project performance, saw residential verticals holding their own against strong headwinds. However the same could not be said of non-residential counterparts, where activity declined or remained sluggish.

Sector Analysis – Residential

November was a relatively stable month for residential construction, with project-starts falling 1% against the preceding three months but remaining unchanged on a year ago.

Social housing construction-starts were largely responsible for the decline, falling by a tenth against the preceding three months and by 29% compared with last year.

However, this was balanced out by private housing-starts which improved, increasing 1% against the preceding three months, up 9% on 2021.

Sector Analysis – Non-Residential

Poor performance in the non-residential sector echoed the industry’s general tale of decline and fall.

Amidst the cost-of-living crisis, Hotel & Leisure construction-starts suffered during the three months to November, falling 30% against the preceding three months to stand 40% down on 2021 levels.

Similarly, industrial construction-starts fell 15% against the preceding three months and by a tenth compared with a year ago.

Health and education project-starts plummeted 37% and 11% during the three months to November, respectively. Both also fell against the previous year, with health-starts dropping 37% and education-starts by 15%.

While office-starts fell by 12% against the previous three months, the value increased 3% against the previous year. Indeed, offices and private housing were the only sector verticals to achieve growth compared with 2021 levels.

Civil engineering starts fell by a quarter against the preceding three months and 12% compared to a year ago. Utilities work starting on-site weakened 23% during the three months to November to stand 8% down on 2021 levels. Infrastructure experienced the steepest overall declines, with project-starts falling 25% against the preceding three months and 13% against the previous year.

Regional Performance

Scotland was the only areas of the UK to experience growth against both periods, with the value of project-starts rising 3% against the preceding three months and 4% compared with a year ago.

London and the West Midlands had a relatively good period compared to other regions, with project-starts advancing 3% and 5% against the preceding three months. Both remained behind 2021 levels, falling 8% and 3%, respectively. They were the only other regions to experience growth against the Review period.

In contrast, Northern Ireland experienced the weakest period for project-starts compared with the preceding three months, with the value declining 39% but standing 13% up on a year ago.

The East Midlands experienced a steep fall, standing 23% lower than the preceding three months to November, revealing a value decline of 16% compared to 2021.

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