Construction activity has recovered strongly since the start of the year as
the vaccine rollout and progressive unlocking of the economy have started to
rebuild confidence, according to Glenigan.
The value of underlying project starts during the three months to May rose
by 20% and was 70% higher than when the UK was in the midst of the first
national lockdown a year ago.
After this sharp initial upturn, a steadier progressive strengthening in
project-starts is anticipated over the forecast period. By next year we now
expect the value of underlying starts (projects with a construction value of
less than £100 million) to total £54.2 billion, 3% above 2019 levels.
However, the recovery will not be evenly spread, with regional and sector
champions and laggards reflecting a changing UK economic and social landscape.
This article highlights the champions, and therefore where you might want to
focus your efforts to build a robust pipeline over the next two years to 2023.
Private housing project-starts performed very well during the first five
months to May 2021, increasing 70% against the previous year. As existing sites
were completed during the second half of 2020 and as housebuilders adapted to
new working practices, housebuilders have switched their attention to new
developments.
Overall private housing starts are forecast to increase 53% this year and
11% in 2022. By the end of the forecast period, private housing project-starts
are anticipated to reach 2017 levels.
The value of projects securing planning approval has strengthened in recent
years with growth in every year since 2015 except for 2018 when
project-approvals fell slightly by 3%. The value of project-approvals in 2020
held up despite the pandemic and increased 5% against the previous year.
Detailed planning approvals in 2021 have been strong, with a 41% increase in
approvals during the five months to May.
The pandemic caused a short-term decline in project-starts in 2020 but
renewed growth is anticipated from 2021 supported by increased investment from
housing associations.
Housing associations are now better placed to finance and take forward new
developments than in recent years. Government requirements limiting
association’s rent increases to 1% below the rate of inflation have been
lifted, providing associations with greater flexibility to increase their
borrowing to fund new developments.
In addition, last year saw a sharp rise in capital funding for MHCLG housing
and communities projects to £10.4 billion. Whilst, lower funding of £8.8
billion is available during 2021/22, it remains up on earlier levels. Together
these two measures are expected to support a strengthening in housing
association development activity over the forecast period.
The value of student accommodation work is anticipated to improve over the
next two years; however we anticipate that it will still be 12% below its 2018
peak by the end of 2023.
For more details on other major sectors and the overall picture go here.
