Glenigan, one of the construction industry’s leading insight and intelligence experts, releases the January 2024 edition of its Construction Review.
The Review focuses on the three months to the end of December 2023, 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 January Review’s central finding is that starts continued to decline during Q.4 2023, primarily the result of the immense economic pressure currently being placed on UK construction. Overall, project-starts fell by a fifth (19%) compared to the preceding three months’ performance. Furthermore, figures stood a third (-31%) lower than the same period in 2022.
This fall was largely driven by a significant drop in major project performance, plummeting 17% against the preceding three-month period, with starts being slashed almost in half (-44%) compared with last year.
Allowing for the expected Christmas wind-down, encouragingly, underlying (<£100m) work starting on-site stood 4% up on the preceding three months on a seasonally adjusted basis. Despite this modest uptick on Q.3, however, underlying starts remained a fifth lower than 2022 levels.
This general drop in activity was also reflected in main contract awards, which tumbled 11% against the previous quarter, and 34% against 2022 levels.
Similarly, detailed planning approvals were down too against the preceding three months (-23%), finishing 4% behind the same time last year.
Commenting on the January Review, Glenigan’s Economic Director, Allan Wilen says, “Poor construction performance in Q.4 can be attributed to persistent, external economic pressures which are weighing the industry down. High interest rates, declining business investment, as well as the expected Christmas slowdown led to pauses and delays in project-starts as we came to the end of 2023.
“The softening in both main contract awards and planning approvals aligns with the general, downward pattern of UK economic activity and a febrile political environment, less than a year away from a General Election. However, it’s not all doom and gloom. A rise in private housing projects is a positive sign, suggesting developers’ expectations for the housing market in 2024 may be on the up.”
The sector-specific and regional index, which measures underlying project performance, saw starts softening across the board. However, the residential vertical picked up, complemented by some encouraging upticks in a handful of UK regions.
Sector Analysis – Residential
Residential starts increased 14% during Q.4 2023, but stood 8% lower than a year ago. Private housing was the major contributor to residential-starts improvement, rising 19% in Q.4, but weakening by 9% on 2022 levels.
Social housing faltered (-2%) against the preceding quarter, with performance also dipping by 5% compared to last year.
Sector Analysis – Non-Residential
Non-residential performance was mixed during Q.4 2023. Community and amenity was the stand-out vertical with underlying starts rising 6% against the previous quarter to stand 28% higher than a year ago.
Retail also experienced a strong period in Q.4, growing 20% against the preceding three months, up 6% against the previous year.
Hotel and leisure starts were up a whopping 119% in Q.4 2023 but fell back 26% on 2022 levels.
Performance was poor across the remaining verticals, with industrial and office projects both freefalling 48% compared with the year before. Both verticals also declined against the preceding three-month period, dropping 20% and 17%, respectively.
Education also fared poorly with starts dropping 24% during Q.4 and 22% against last year’s results.
It was a similar story for health starts which fell back 37% against the preceding three months to finish 41% lower than 2022 levels.
Civil starts slipped back 4% in Q.4 and 26% on 2022 levels. This overall decline was largely due to a drop in infrastructure activity, with starts tumbling 6% against the preceding quarter to stand 30% down on last year. On the other hand, utilities starts remained flat against the preceding quarter and were 17% down on the previous year.
Regional Performance
Growth was inconsistent regionally. London was the strongest performing part of the UK, with project-starts increasing 29% during Q.4, despite falling back 11% on the same period in 2022.
The South East also had a good fourth quarter, with starts rising 16%, but declining 29% on 2022.
Starts in the West Midlands (+11%) and North East (+31%) also advanced on the preceding quarter to stand 16% and 14% up, respectively, against the previous year.
Some areas of the UK performed particularly poorly, including Northern Ireland and the East Midlands where the value of projects fell 39% and 51% on a year ago.
This was also the case in Wales, Yorkshire & the Humber, and the North West which also suffered falls in project-starts against 2022 levels.
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