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Brexit uncertainty weighs on project starts

  • Starts in the three months to July were 12% up on a year ago, but 32% down on the previous three months.
  • Residential starts were 10% lower than a year ago and 36% down on the preceding three months.
  • Non-residential project starts were 9% down on a year ago and 20% lower than during the February to April 20165. Office project starts dropped 38% against the preceding three months and were 32% down on a year ago.
  • Public sector non-residential areas were also down on the same three months a year ago, when project starts were starting to improve following General Election related disruption.
  • Civil engineering projects starts dampened overall starts, being 32% down on a year ago.

The value of work starting on site in the three months to July was 12% down on the same period of a year ago, according to the latest Glenigan Index.

Commenting on this month’s figures, Allan Wilén, Glenigan’s Economics Director, said: “The 12% decline in Glenigan Index covers project starts in the run-up to the EU referendum and its immediate aftermath. High levels of political and economic uncertainty during the period prompted many private sector investors to defer investment decisions, contributing to the recorded drop in project starts.

“Non-residential project starts were particularly weak, due to fewer office, hotel & leisure and industrial projects commencing on site. This, combined with a fall in civil engineering project contributed to the overall decline in the index against both the preceding three months and a year ago.

“The three months to July also saw a 10% drop in residential project starts, as a slowing in private sector work combined with weak levels of social housing starts.

“The potential development pipeline remains firm, with the value of projects securing detailed planning approval during the first half of 2016 is 5% up on a year ago. However the strongest growth in approvals have been in those sectors where project starts have been most affected by referendum uncertainty; private housing, industrial and office developments.

“The political outlook has begun to become clearer in recent weeks, following the appointment of the new Prime Minister and cabinet. Nevertheless we anticipate that the uncertain economic and political outlook will continue to disrupt the progress of some projects to work on site. Accordingly, we expect an overall weakening in project starts during the second half of 2016.

Regionally the North East and West Midlands were the only parts of the UK were starts were up on the three months to April. However, there was a more mixed performance against May to July 2015, with the value of underlying starts in the South East, South West, West Midlands and Scotland all ahead of a year ago.

Source: Glenigan

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Download the latest Glenigan’s Brexit report here

BrexitIf you’re not sure about the impact of #Brexit and the #EU referendum on construction, then you may want to download the Glenigan report here or read my latest blog with a few examples of the pros and cons of staying in the EU or leaving.

If #Brexit and the referendum is having an impact on your business, particularly around any staffing issues, please comment below or get in touch with one of the Temple Recruitment Team on info@temple-recruitment.co.uk.

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Improved project starts brightening construction prospects

A rise in projects starts during the first quarter against the closing months of 2015 points to a brightening outlook for industry workload over the coming months.

The latest Glenigan Index shows that the value of work starting on site in the three months to March was 5% up on the preceding quarter, although 13% lower than a year ago in the three months to March was 13% down on the same period of a year ago. This improvement on the performance in recent month is evidence that industry workload is stabilising after the disruptions seen over the winter.

Furthermore the development pipeline is continuing to strengthen, with the value of work securing planning approval in the first quarter 9% up on a year of planned projects, driven by an increase in private sector schemes. The development pipeline of private housing, industrial and office projects are particularly strong.

“Private investor confidence will be key. Near term we anticipate that some private sector investors will defer their final commitment to proceed with planned projects until after June’s EU referendum.

Nevertheless we anticipate that the strong private sector development pipeline expected to boost tendering opportunities over the coming months as clients’ line up work to start in the second half of the year.

Accordingly while the impending vote is likely to dampen project starts in the near term, the second half of 2016 could see a sharp rise in activity as private investors press ahead with projects once the issue of EU memberships has been resolved.”

Many of those areas worst affected at the turn on the year by the flooding and water logged ground have seen the sharpest turnaround in project starts. The North West, West Midlands East of England and Scotland all saw a double digit growth in the value of projects starting on site during the first quarter.

Source: www.glenigan.com

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Industrial sector growth continues

The industrial sector has been a growth area for construction over the last two years.

The industrial sector has been a growth area for construction over the last two years. Whilst we anticipate a near term weakening in project starts ahead of the EU referendum, the longer term prospects remain bright. Having grown rapidly during 2014, with the value of starts jumping nearly 50%, industrial project starts rose by a further 5% last year. The relatively short construction periods associated with warehousing construction in particular means that the rise in project starts provides a fairly immediate boost to overall output. Indeed the Office for National Statistics recorded a 14% rise in the volume of sector output during 2014 and output rose a further 10% last year.

The demand for logistical space has been an important driver behind sector growth in recent years. Structural changes in the retail and distribution sectors should continue to fuel the demand for new premises over the medium term.

Light industrial and manufacturing have also contributed to sector growth over the last two years. However after growing strongly during 2014, the UK’s manufacturing sector has slowed during 2015 as a result of renewed weakening in export demand from the Eurozone. UK manufacturing output fell in the third quarter of last year. A more up-to date CBI survey released in February found manufacturing output was flat over the preceding three months, with total orders books steady after a fall in January.

Near term this stabilisation in output and order books manufacturing appears to be prompting manufacturers to temper back earlier plans for adding capacity and investing in equipment. Furthermore the impending referendum on EU membership is expected to also depress industrial project starts in the as investors defer decisions until after the vote on 23 June. This is expected to be particularly the case for manufacturing projects given that EU’s UK largest export market.

Nevertheless, the medium term prospects for the sector remain positive. A recent report by Lambert Smith Hampton found that rising demand for industrial premise continued to outpace supply, with the available floorspace falling for most types of industrial premises over the last year. Whilst there was an increase in the availability of Grade A logistic and mid-box premises last year as a result of increased speculative investment in new premises, the overall supply in these market segments continued to contract.

In addition Glenigan has tracked a 16% rise in the value of industrial projects securing detailed planning during the 12 months to February. Given the firm demand for industrial floorspace and the strengthening development pipeline, we expect a renewed strengthening in project starts during the second half of this year and in 2017.

Source: www.glenigan.com

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Key Statistics: November 2015

Construction

  • The first release of GDP estimated a 2.2% decline in construction output during the third quarter, due largely to an August slump. Though this figure will be revised as further data comes in, this would equate to the first quarterly year on year fall since Q1 2013.
  • The Glenigan Index for November was up 6% year on year, returning to growth after six months of contraction. The housing, civil engineering and non-residential building sectors were all up on a year earlier. Indications of coming activity are strong: Glenigan have recorded rising values of work achieving planning approval in 11 of the 12 constituent English regions and nations of the UK. Only the capital saw approvals down compared to a year earlier during 2015 so far (nine months to September).
  • October’s Markit/CIPS PMI survey indicated the strongest employment growth in almost a year, despite the pace of growth decreasing in both the residential and civil engineering sectors. Some respondents commented on efforts to reduce their reliance on sub-contractors; the availability of whom fell for the 28th month running.

Economy

  • Car registrations in the UK, a barometer of consumer confidence and spending, fell in the year to October for the first time since February 2012. While potentially an indicator of weakening consumer spending, registrations for the year to date remain 6.4% higher than a year ago so one weak month should not be a cause for concern.
  • UK mortgage approvals fell in September for the first time in four months, according to Bank of England statistics. 68,874 loans were approved for home purchases, down from 70,664. Summer had shown signs of a renewed easing in credit and rise in housing market activity, after changes to regulations dampened lending from mid-2014 to early 2015.
  • The Confederation of British Industry revised down its GDP forecasts for this year and next. It expects growth of 2.4% in 2015 and 2.6% in 2016; these are both 0.2 percentage points than forecasts made in August. They predict that an emerging markets slowdown and a strong pound will weigh on growth, but that domestic demand will remain strong.

 

www.glenigan.com

 

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Key Statistics: 27 October 2015

Construction
•The RICS Construction Market Survey for Q3 2015 found construction activity growing in all parts of the UK, with a positive balance of 39% of surveyors reporting a rise in workloads. The Midlands and East Anglia saw the indicated the strongest rises. Private housing and commercial work remain the strongest areas of expansion.
•Demand for permanent construction staff rose strongly in September, according to the KPMG/REC Report on Jobs. Demand for permanent construction staff was higher than the UK average. Demand for temporary staff softened, and was weaker than the all industry average, though remained well above the no-change mark.

Economy
•UK Manufacturing orders suffered their biggest decline in three years during the three months to October, according to the CBI’s industrial trends survey. According to the CBI, domestic demand is easing, adding to exisitng pressures from weak global growth and the strong pound.
•A UK marketing survey, The IPA Bellwether report, suggests that economic confidence eased during the third quarter of 2015. Marketing budgets grew at the weakest rate since 2013; moreover those surveyed were less positive about their industry’s financial prospects. Marketing budgets are often an indicator of firms’ willingness to invest.

Latest statistics from Glenigan

 

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Glenigans Key Statistics: 13 October 2015

Construction

  • Construction output declined further during the three months to August, falling by 0.8% compared to the previous three month period. Output over the period was 1.8% higher than a year earlier, weaker than the growth rate of the wider UK economy and the slowest for two years. This slowing is entirely due to lower repair and maintenance work- these tend to be ongoing short-term investments which are likely to have been halted due to election hiatus. Projects started last year mean new build output growth has continued, but the slowing in starts recorded earlier this year by Glenigan will reduce output growth over the next 6 months.
  • The Glenigan Index for October was down 2% year on year, however the figures indicate a bounce back after an election hiatus over spring and summer. September and August both saw strong levels of construction project starts; a weak July held back growth. The private housing and commercial sectors were particularly strong.
  • The Markit/CIPS PMI survey reached its strongest level since February, due to strong rises in commercial and residential activity. The survey suggests that sub-contractors are still getting busier, but shortage of supply and rates of price rises eased slightly. 52% of those surveyed expect growth in the next 12 months, while just 6% expect decline.

Economy

  • Surveys from both the CBI and Markit point to a recent weakening in UK manufacturing. The CBI found zero output growth during the three months to September, for the first time in over two years. The Markit PMI remained above the 50.0 neutral mark, but at the lowest level for three months. Both surveys pointed to a decline in export orders as a cause for the slowdown.
  • Labour productivity showed an encouraging sign during 2015 Q2, with output per hour rising by 0.9% compared to the previous quarter. Compared to both the previous quarter and a year earlier, this rate of improvement was the strongest seen since 2011. UK productivity has been exceptionally weak since the start of the economic downturn, and the ONS estimate it is 15% lower than if pre-downturn trends had continued. Improving productivity is generally seen as essential for long-run growth in wages and living standards.
  • Household spending during 2015 Q2 rose by 0.8% compared to the previous quarter and by 3.1% from the same quarter a year ago, according to the ONS.
  • In the 3-months to August 2015, the UK’s deficit on trade in goods and services was estimated by the ONS at £8.1 billion; widening by £1.3 billion when compared with the 3-months to May 2015. The combined trade deficit of the first two months of quarter 3 (July and August) 2015 is already double the total trade deficit in quarter 2 (April to June) 2015.

www.glenigan.com

 

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Glenigans Key Statistics August 2015

Key Statistics: 25 August 2015

Construction

  • The Construction Products Association (CPA) has revised down its forecast for 2015 construction output. Growth of 4.9% is now expected for the full year, down from 5.5% previously forecast. Growth of 4.2% is forecast for 2016, up from 4.0% previously. The CPA see infrastructure as a particularly strong area, with double digit growth forecast every year until 2019, the end of the forecast period.

Economy

  • The Confederation of British Industry (CBI) has expects UK GDP growth of 2.6% this year and 2.8% in 2016. These have been revised upwards from previous forecasts of 2.4% and 2.5% respectively. The CBI’s Director-General John Cridland commented, “We’re encouraged by the twin engined-growth of household spending, spurred by stronger wage increases and low inflation, buttressed by business investment”.
  • UK CPI inflation ticked back into positive territory in July at 0.1%, up from 0.0% in June. Extremely low levels of inflation reflect falls in the global oil price and price competition between UK food and non-food retailers.

www.glenigan.com

 

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Glenigans Key Statistics August 2015

Construction

  • The August Glenigan Index fell by 27% compared to a year earlier, due to private sector clients having delayed schemes in the aftermath of the general election. Every sector tracked by Glenigan saw a decline in starts compared to a year earlier, though the decline in private housing was comparatively modest.  However confidence remains strong in the English regions, Scotland and Wales. Every part of Great Britain except London and the South East saw the value of work approved increase during 2015 Q2.
  • The July Markit/CIPS PMI showed a in business activity and new orders, as one of the weakest readings for residential growth in the last two years offset a four month high in commercial sector growth. The survey also found that job creation slowed but is well above average levels and reports of skills shortages were widespread. Sub-contractors continued to be in short supply with their availability falling for the 25th consecutive month, and they raised their charges at a near survey record pace.

Economy

  • Hiring for both permanent and temporary roles rose at the slowest pace for over two years in July, according to the KPMG/REC report on jobs, a survey of recruiters. Growth in vacancies also increased at the slowest rate for two years. This reduction in demand appears to have offset the difficulties in finding staff; though availability of permanent candidates declined at the fastest rate since November, pay inflation for new permanent hires reached its lowest level for 18 months. Construction workers saw amongst the highest rises in demand for both permanent and temporary roles.
  • The UK’s trade deficit narrowed during the second quarter of 2015, to £4.8 billion from £7.5 billion in 2015 Q1. This was primarily due to a £3 billion rise in exports of goods, which narrowed the deficit in trade in goods to £27.4 billion; the smallest since 2013 Q2. This was partially offset by a £22.6 billion surplus in services, down slightly compared to the previous quarter.
  • British new car registrations rose by 3.2% year on year in July, according to the SMMT. The SMMT attributed the rise to “prevailing economic confidence combined with low interest rates and attractive finance deals”.

 

www.glenigan.com

 

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More work Less Play! Glenigans June 2015

A shortage of skilled labour is among the chief concerns for construction businesses; something we’ve covered in our post-recession challenges briefing. However the industry as a whole has so far managed to meet expanding demand, even if the rate of growth has eased during the last six months. Employment data show that the pressure on industry capacity has so far been largely absorbed by existing staff working longer hours. However, industry recruitment will need to strengthen over the coming year if construction is to accommodate rising workloads.

According official ONS statistics during the first quarter of 2015 there were 2,124,000 jobs in construction. This was a rise of 0.3% compared to the previous quarter, with construction’s workforce growing by an estimated 1.3%  over the preceding 12 months and continuing the slow pace of employment growth seen over the last two years.

Indeed 2014 saw construction employment rise by just 2% in contrast to the 9.5% surge in construction output during the year.

This is in contrast to to the experience during the downturn, when construction employment initially held up relatively well in the face of plummeting workloads as firms sought to hold onto their best staff by cutting back on hours as well as jobs.

This sharply reduced the average working week which had been gradually shortening over the previous decade. However since mid-2012 working hours have steadily risen once more, as firms have been either unable or unwilling to hire additional staff. In the final quarter of 2014, the average construction worker was working more hours than at any point in the last decade.
A modest increase in employment and an easing in total workloads saw a dip in the average weekly hours worked during 2015 Q1. However this is likely to be short-lived. Glenigan is forecasting further output growth for 2015, which in the absence of hiring on a larger scale will further increase the demands placed on the existing workforce, or see firms having to turn down work.
Whether this uptick in employment is yet underway is less clear.  According to the May Markit/CIPS Construction PMI, job creation in May hit the fastest level seen all year. However the May KPMG/REC Report on Jobs, a survey of recruiters, found that demand for construction workers grew more slowly than any other employment sector during May, across both permanent and temporary roles.
www.glenigan.com
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Glenigans Key Statistics June 2015

Construction

  • Employment in the construction industry rose by 0.3% in the first quarter of 2015 compared to 2014 Q4 and by 1.3% compared to a year earlier. For a more detailed analysis of the statistics see this week’s lead story.

Economy

  • Rising income tax and national insurance receipts boosted the public finances in May. Public sector net borrowing was £10.1 billion during the month, a drop of 18% compared to the £12.4 billion in May 2014. April also recorded a drop in borrowing relative to a year earlier.
  • UK Retail sales growth slowed in May, rising by 0.2% compared to the previous month after a strong 0.9% rise in April. The early hot weather affected the figures, with earlier than usual summer clothing purchases having boosted sales in April, before falling in May.

www.glenigan.com

 

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Glenigans

Housing brightest spot as construction suffers election hangover

  • Glenigan Index for June down 10% year on year.
  • Non-residential and civil engineering work down 21% on previous year.
  • Residential Index up 9%, with rises in both private and social housing sectors.
  • Education sector down 20% as universities hold back project starts.
  • UK picture reveals continued contraction, with only the East Midlands escaping the slowdown.

UK construction continues to feel the impact of the general election as activity drops for the second consecutive month, according to figures released today (1 June) by industry analysts Glenigan.

The Glenigan Index for June, which covers the value of projects starting on site during the previous three months, has declined by 10% as activity stalled in the run up to polling day.

Civil engineering and non-residential work fell by 21%, with further declines in the retail, office and industrial sectors. Following last month’s strong performance, hotel and leisure starts have now also fallen into the red, down 20% on a year ago.

By contrast, the Glenigan Residential Index is up 9%, with value of schemes started by private housebuilders 14% higher than a year earlier – the fastest expansion since July 2014.

Social housing starts were also up on a year earlier, with the sector seeing a modest upturn in recent months after weakening during 2014.

Commenting on the figures, Allan Wilén, Economics Director at Glenigan, said: “Despite the recent slowdown in project starts, our data indicates that activity will bounce back quickly over the next couple of months.

“The value of contracts awarded has continued to grow during 2015 and developers will now be mobilising their project teams.

“We expect this to come to fruition with a surge in starts during the second half of the year.”

Elsewhere in this month’s Index, the public sector experienced differing fortunes, with declining non-residential work driven by a 20% fall in education starts as universities continue to postpone schemes.

In contrast, the health sector saw starts increase by 20%, even excluding major projects including Papworth Hospital in Cambridge and the New Dumfries and Galloway Royal, both funded through variations of Private Finance Initiative models.

The regional picture reveals continued contraction, with only the East Midlands escaping the slowdown. London and the South East saw only modest declines, as did the North West and North East of England. However other parts of Northern England, the West Midlands and Wales all saw sharp falls relative to a year ago.

The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-month period, providing an indicator of developing activity and future output in the industry.

www.glenigans.com

 

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Key Statistics – Construction 2015 – From the Glenigans

Construction

  • More construction companies opened than closed during 2013, for the first time since 2008, according to analysis by accounting specialist NoPalaver of Companies House registrations. 38,335 companies opened during the year, a net gain of 5,445 registered companies. 2012 had seen a net loss of 7,030 construction firms.

Economy

  • Official UK Labour Market Statistics for the three months to February 2015 show:
    • The UK 16-64 employment rate rose even further in the three months to February 2015 to 73.4%; the highest since comparable records began in 1971.
    • The unemployment rate continued the downward trend established over the last two years; falling to 5.6% from 5.8% in the previous quarter and 6.9% a year ago.
    • The 18-24 unemployment rate remains over twice this average at 14.3%, though it has fallen from 17.1% a year ago
    • Average weekly earnings (excluding bonuses) rose by 1.8% on a year earlier during the three months to February, roughly on a par with growth seen over the last six months.

 

Article from the Glenigans – April 2015

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Construction and Economy Statistics – Glenigan Index

Construction

  • Construction output continued to weaken during the three months to January 2015 according to ONS estimates. All work output declined by 2.8% compared to the previous three months; pegged  back by a 7% drop in R&M output. New work output was flat, with rises in commercial and infrastructure output offset by contraction in the housing, public non-housing and industrial sectors. Compared to a year earlier output was up by 2.4%; slower than the prevailing rate of expansion in the UK economy as a whole after having outpaced other sectors over the last eighteen months.

Economy

  • Britain’s high streets lost shops during 2014 at almost three times the rate in 2013, according to research by PwC and the Local Data Company. Across retailers with multiple premises in the 500 town centres studied, there were 5,839 closures and 4,852 openings, a net decline of 987 shops. This compares to 371 net closures in 2013. Leisure, beverage and food premises fared well during the year, as did charity shops, pound shops and betting shops. However this was more than offset by closures of traditional retailers such as clothing and shoe shops, and of service retailers such travel agents and hairdressers.
  • Manufacturing output during the three months to January rose by 0.4% compared to the previous three months, to 2.6% higher than a year earlier. Combined output of the UK’s production industries, including manufacturing, was flat on the previous three months and up 1.1% on a year earlier.
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Construction shakes off winter cold

  • Glenigan Index for March finds construction activity up 6% year on year.
  • Residential Index shows highest growth since August 2014, boosted by 12% rise in private housing schemes.
  • Non-residential construction starts expanded by 5%, fuelled by gains in privately funded building.
  • Civil engineering back in the black, with project starts up 3%.
  • Public sector activity remains subdued due to continuing declines in health and community and amenity sectors.

A double digit rise in private housebuilding has driven construction activity into positive territory for the first time this year, according to new figures from industry analysts Glenigan.

The Glenigan Index for March, which covers the value of projects starting on site in the three months to February, is 6% up on a year ago, with private housing returning to the forefront of industry growth.

The underlying value of private housing schemes starting on site rose by 12%, taking the Glenigan Residential Index to 8% higher than a year earlier – the fastest rate of expansion since August 2014.

There was also some respite for the social housing sector, where starts were up on a year earlier for the first time since August, albeit by a modest 2%.

GleniganIndex_Mar-15

Allan Wilén, Economics Director at Glenigan, said: “Buoyant financial results statements released by several housebuilders in recent weeks point to housing market conditions remaining strong.

“Sales rates have remained level with, or above, rates seen during the first eight weeks of 2014, despite the number of mortgage approvals falling by 17% between January and December last year.”

He added: “A tightening of lending procedures by the Bank of England led to a cooling in mortgage lending throughout 2014.

“However approvals picked up by 2% between November and December – a sign that the reforms have bedded in and mortgage credit may begin to ease once more over the coming months.

“Moreover, the pipeline of potential schemes is strong. The underlying value of detailed planning approvals secured for private housing schemes has risen by 15% over the 12 months to January.”

Elsewhere in this month’s Index, civil engineering starts are also back in the black, up 3% compared to a year ago.

Large schemes starting on site during the period include the dualling of the A26 between Glarryford and the A44 in County Antrim (Glenigan Project ID: 13397818). Construction has also begun on the £90 million Humber riverside berth in Hull, which will be used to transport offshore wind turbines built by Siemens (Glenigan Project ID: 11031193).

Non-residential construction starts expanded by 5% compared to a year ago, fuelled by gains in privately funded building.

Industrial starts rose by 8% compared to a year earlier, a strong performance given that starts in this volatile sector expanded by 86% during the same three months last year.

New commercial construction remains on the up with the office, retail and hotel and leisure sectors all seeing higher values of starts compared to 2014.

Across public sector dominated areas, activity was more subdued.

The underlying value of education starts rose by 3% during the latest three months. However growth in the underlying value of health starts has faltered after growth in the third and fourth quarters of last year.

Meanwhile, the decline in community and amenity projects seen during 2014 has continued unabated. Starts fell by 11% during 2014 and are down a further 20% over the last three months.

London has seen a modest drop in starts, down 4% year on year. However, as starts rose by 47% during the same period of 2014, the dip points to stabilisation rather than a sign of weakening activity ahead.

The Northern regions have been the main engine of growth across England over the last three months, with the East Midlands also recording a strong rise in activity.

Wales and Northern Ireland registered higher levels of starts than a year ago; however activity in Scotland is still being hindered by a slowdown in detailed planning approvals during 2014.

The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-month period, providing an indicator of developing activity and future output in the industry.

Posted by the Glenigans March 4th 2015

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