Construction industry recovery gathers greater momentum in Q.3

• Activity uptick in September following slower summer suggests project start growth in Q.4 2021 and Q.1 2022

• Non-residential project-starts performed strongly, having increased 10% compared with the preceding quarter (SA) to stand 44% up on the previous year. The value increased 7% compared with the same period in 2019.

• Industrial was the stand out sector during the period, up 66% on Q.2 2021, 152% against Q.3 2020, and 101% Q.3 2019

• Residential project-starts remained heavily behind 2019 levels, with the value having fallen by a third (34%)

• North West is the only region which experienced growth against Q.2 2021, with project value climbing 7%.

Today Glenigan, the construction industry’s leading insight and intelligence experts, release the October edition of its Construction Index. 

Offering a detailed and comprehensive analysis of year-on-year construction data, this proprietary research has been designed with built environment professionals in mind, presenting unique insights from the last year.

This month sees the sector start to overcome some of the challenges faced in the spring and summer from material and skills shortages.  

Project-Start Levels Rally

Although overall project-starts saw a steady slowdown in Q.2 and Q.3, after an initial surge in the first quarter, momentum appears to be building once again, with an activity uptick registered in September. 

Further, the development pipeline remained robust throughout the year, particularly for some non-residential sectors, including industrial. 

Main contract awards have been increasing over the last eighteen months, ever since the first National Lockdown in March 2020 and detailing planning approvals remain consistently high. 

Complemented with improved trading conditions as well as an increase in consumer and business confidence, the Glenigan Economics Team predict these combined conditions will lead to project-start growth in the coming months and into 2022. 

Business & Industry

Non-residential projects demonstrated considerable strength in Q.3, increasing 44% against the previous year and 7% compared with the same period in 2019. Additionally, the value increased 10% against the preceding quarter. 

Industrial was the stand out sector during the period, up 152% against the previous year and 66% on Q.2 2021, standing a massive 101% higher than Q.3 2019.

Project-starts included the £76 million East Midlands Distribution Centre in Castle Donington, the £60 million Ivory Infinity Park also in Derbyshire. Plus, manufacturing projects including the new £82 million wind turbine factory for Siemens on Alexandra Dock, Hull, and the £40 million Advanced Manufacturing Facility for Unilever in Sharnbrook, Bedford.

Office project starts were also strong, increasing 7% against Q.2 and up 43% against the previous year and climbing 9% compared with the third quarter of 2019.

Healthy Results

Looking deeper, Healthcare grew during Q.3, comparative to the same period 2020 and 2019. Health projects increased by over a half on 2019 (57%), with starts growing 6% against 2020 and 14% up on Q.2 2021.

Retail starts were up 38% in Q.3 against 2020 levels, with an 8% increase on the same period in 2019. Hotel & Leisure project-starts increased against the previous year but declined heavily compared with the same period in 2019 (-27%).

Room for Improvement

The value of residential work commencing on-site during the third quarter of 2021 fell by over a quarter (27%) against the preceding quarter (SA) and 12% compared with the previous year.

Residential project-starts remained heavily behind 2019 levels, with the value having fallen by a third (34%). Private housing-starts fell 6% against the previous year and 33% compared with the preceding quarter (SA). Furthermore, private housing-starts fell by 38% compared with the same period in 2019. The weakening in private new housing activity may reflect expectations of a cooling in the housing market over the coming year.

Social housing project-starts declined 10% against the preceding quarter (SA) and 24% compared with the previous year. Social housing project-starts fell 19% compared with the same period in 2019. The spending review later this month may see additional funds directed towards building more social homes.

Regional Performance

Looking across the UK region-by-region, the North West took the lead during the third quarter, achieving the highest growth against the previous year (45%). It is also the only region which experienced growth against Q.2 2021, with project value climbing 7%. 

The West Midlands was another region achieving growth against the previous year, with the value of project-starts having increased 13%. This was despite having experienced a 10% decline compared with the preceding quarter.

London performed relatively well, with project value increasing by 22% compared to a year ago. However, this value fell 11% against the preceding quarter. 

Project-starts in the East Midlands fell only 3% against the previous year but experienced heavy declines against the preceding quarter on a seasonally adjusted basis (-36%) and the third quarter of 2019 (-39%). 

Project-starts performed particularly poorly in Northern Ireland, Wales, Yorkshire & the Humber and the North East.

Commenting on the results, Glenigan’s Senior Economist Rhys Gadsby says, “It’s encouraging to see growth starting to return to the sector after Q.1’s spurt levelled-off over the Spring/Summer 2021. There are a number of major projects coming online which are driving the industry forward, however, residential figures still remain low, with the persisting problems around on-site skills, materials and HGV shortage negatively affecting activity. Against this context, it will be interesting to see if this relatively poor performance can be turned around now there’s a new team in the soon to be renamed MHCLG.”

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