UK construction continues to be “battered by economic headwinds and sudden, ad hoc policy change”, Glenigan has concluded in its latest quarterly assessment.
The data insight provider’s latest Construction Review, covering the three months to the end of September 2023 (Q3), showed that starts on site were down 40 per cent year-on-year and were 9 per cent lower than in Q2 this year.
There was also a decline in main contract awards, which fell by 27 per cent compared with the previous quarter and were 12 per cent lower than Q3 2022.
Residential and industrial project starts dropped by 10 per cent and 38 per cent respectively compared with Q2 this year, Glenigan found.
It added that increasing interest rates and labour shortages were “stifling activity”, and warned that the cancellation of the second phase of HS2 “will have a seismic effect on many verticals in the coming months”, particularly civils.
Glenigan saw a “small degree of hope” from planning approval figures. Detailed planning approvals were up 12 per cent on Q2 2023, and now stand about a third (32 per cent) higher than in Q3 2022.
This suggests “the green shoots of recovery are tentatively appearing” but Glenigan stated that its sector-specific and regional analysis suggested an overall “picture of general decline”, with project starts falling across almost every vertical.
Glenigan economics director Allan Wilen said: “Starts on site continue to soften and, as economic and political disruption continues, we’ll likely see clients and contractors continue to adopt a cautious approach to start dates until the landscape looks a little less hostile.
“The prime minister’s recent cancellation of HS2 phase two is very disappointing, with many having already heavily invested both in the project and the new development opportunities that it would have unlocked. However, the promise of redirected infrastructural investment in the North should shine a light. It may help offset constrained activity with a boost to major projects down the line. Hopefully, we’ll gain more clarity on the government’s spending in the transport and energy verticals in the run-up to next year’s election.
“The leader of the opposition’s speech at the Labour conference last week should also give contractors and developers some cheer, with a major focus on housebuilding should his party succeed in 2024. It will be interesting to see his proposed changes to planning laws take shape over the next 12 months.”