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Spearheaded by strong performances from the housing and hotel, leisure & sport sectors, overall contract value for the construction industry in February reached £6.4 billion based on a three month rolling average, a 15.4 per cent increase on the same month last year.

According to the latest edition of the Economic & Construction Market Review from industry analysts Barbour ABI, contracts for housing projects reached £2.7 billion in February, the same figure as January 2017, which are the best performing months for residential building since the economic downturn. Coinciding with the strong housing figures, the hotel, leisure & sport sector construction contracts reached £736 million (see figure 1.1) on the month, a substantial 105.3 per cent increase compared to February 2016.

Barbour ABI

Looking across the other sectors within construction; Infrastructure accounted for £1.48 billion worth of construction contracts on the month, a 20.8 per cent increase on January. Commercial & retail projects also increased month on month by 17.5 per cent – the highest since September 2016, although values in the sector remain lower than previously when viewed over the longer term.

However it was the industrial sector that accounted for the most disappointing figures in February, with a 35 per cent year-on-year decrease and its lowest monthly total since October 2014.

Whilst the value of construction contracts remained very strong on the month, the number of projects saw a decline of 19.6 per cent compared with January. Larger, more valuable projects were commissioned in February, including projects such as a £400 million Port of Dover job and the Trafford Park Metrolink extension, valued at £350 million.

Commenting on the figures, Michael Dall, Lead Economist at Barbour ABI, said “After recent slumps in the infrastructure and commercial & retail sectors, it was encouraging to see both bounce back and produce encouraging figures in February, alleviating some of the pressure away from housebuilding.”

“With the hotel, leisure & sport sector recording its highest construction contract value in years, it will give the sector a well needed confidence boost, thanks greatly to a £400 million holiday resort, another major project given the go-ahead in February, a trend that made last month a positive one for construction.”

The number of projects being put on hold by clients is on the rise. At present, it appears to be smaller value schemes that are currently being suspended, with the value of underlying projects being placed on hold down on a year ago.

Glenigan has identified a 28% increase in number of projects being placed on hold during the third quarter of this year against the same period last year. In contrast the value of projects being suspended (excluding schemes of £100m or more) was 10% lower.

Whilst the number of projects being placed on hold remained subdued in July in the immediate aftermath of the Brexit vote, it has risen during August and September.

Looking across the sectors, the rise in the number of private residential, office and hotel & leisure projects being placed on hold suggests that clients may be reviewing the viability of some planned schemes post-referendum.

Oct25_On_Hold September_2016

However, the Brexit vote is not the only factor at work. The utilities sector has seen by far the sharpest rise in the number and value of projects being placed on hold. Indeed that sector has seen a sharp rise in suspended projects since the start of 2016 and, the number of projects put on hold in the third quarter was 92% up on a year ago. The sharp rise in suspended projects appears to be in response to the Government’s cuts in the feed in tariff rates for renewable projects; almost half of the projects are renewable energy schemes whilst a third are waste treatment projects often involving energy recovery.

Elsewhere there has been an encouraging decline in the number of projects being placed on hold, with fewer retail and social housing projects being suspended during the third quarter. Overall the latest on-hold project data highlights that volatile market conditions facing the industry and the need for firms to be able to identify and respond to new opportunities as they emerge.

After more than two months since the Brexit vote, it’s good news for the residential construction sector, as the value of contracts awarded reached £1.7 billion in August, an increase of 13% compared to the same time last year, based on a three month rolling average.

According to the August edition of the Economic & Construction Market Review from industry analysts Barbour ABI, it was the residential and infrastructure sector that kept the industry on a steady pace last month, delivering £3 billion of the £5.5 billion total construction contracts awarded.

It should also be noted that residential construction across the first two post-Brexit months (July & August) are significantly higher figures than when compared to the same months in 2015.

However even with the strong results from the residential sector, it was not enough to mark an improvement for overall construction new orders as they were down to £5.5 billion in August, a month-on-month drop of £300 million, although this is traditionally a slower summer month.

The commercial & retail sector particularly struggled in August, experiencing a decrease of 43% compared to August 2015, which continues a poor run of performance over the long term for the sector.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said: “The construction sector is yet to experience the full post-Brexit effects that were forecasted to occur after the result was announced. The mixed results from the residential sector has still been robust enough to keep the industry in a position to potentially grow in the near and long-term future.

“Developers are also keen to keep progressing with major projects, such as the £750 million Galloper offshore wind farm and the £150 million Greenwich Peninsula residential development commissioned this month alone, which in turn is helping to build confidence and provide a well needed boost across the industry.”

Read the full report here.

The pace of increase in workloads in the construction market continues to slow, according to the latest RICS UK Construction Market Survey, extending a trend that goes back to the middle of last year.

This flatter picture is visible across all sectors; 17% more respondents reported a rise in activity over the previous three months compared with 28% in the first quarter, with the most pronounced slowdowns being seen in the private commercial, industrial and housing segments. That said, 27% more contributors still reported a rise in private housing activity – down from 36% in Q1 – while 17% more respondents saw their workloads in the private commercial sector rise rather than fall in Q2.

Significantly, for the second successive quarter, the biggest constraint on output according to respondents is finance with more than two-third of contributors highlighting this as the principal challenge. In breaking down the term financial constraints, 36% of respondents reported that a lack of funding was restricting new developments. Meanwhile, planning and regulatory delays also remain a key issue with 60% of respondents citing that these are constraining growth.

Despite the slowdown in activity in Q2, skills shortages remain a problem with 56% of contributors reporting that a lack of appropriately skilled labour was a constraint on growth. Bricklayers and quantity surveyors remain in particularly short supply with 59% and 57% of respondents citing difficulties in these areas.

The more uncertain prospects for the economy have led to a less optimistic outlook for the sector over the year ahead. Although, putting this in perspective, 23% more contributors still expect activity to rise rather than fall over this period. On average, contributors foresee their workloads increasing by 1% over the coming 12 months, down from the 2.8% growth predicted in Q1.
Expectations for employment growth have also moderated significantly with a rise of 0.6% anticipated, down from 2% the previous quarter.

Aside from in Scotland where activity flatlined relative to Q1, respondents in all other parts of the UK continue to report a rise in workloads.

Simon Rubinsohn, RICS Chief Economist, commented “The latest results from the RICS Construction Market Survey suggest that the second quarter of the year saw a further moderation in the growth trend which is not altogether surprising given the build-up to the EU referendum. Significantly, the biggest issue at the present time alongside uncertainty looks to be credit constraints with over two thirds of contributors highlighting this issue as a concern.

“Encouragingly, the swift actions of the Bank of England in creating additional capacity for the banking sector to provide funding to meet demand should help alleviate some of this pressure. Nevertheless, anecdotal evidence does indicate that the challenge for the British government in establishing a new relationship with the EU could see some investment plans in the construction sector scaled back.”

Construction in March gains momentum after a slow start to the year.

After a subdued start for construction in 2016 the industry picked up the pace in March, with £6.1 billion worth of construction contracts delivered. This is the highest figures of the year to date which was particularly influenced by the continued strength of the residential sector.

According to the latest Economic & Construction Market Review from industry analysts Barbour ABI, total construction contract value figures for March were almost 10% higher than in February.

Alongside the improving figures, residential construction contract values were worth £1.9 billion in March, 31 per cent of the total amount of contracts for the month.

The positive news from March continues as the commercial & retail sector increased its monthly contract value by 25 per cent and Infrastructure by 30 per cent, which is an extra £500 million of contract value compared to February.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said “it’s encouraging to see the industry pick up the pace after a lacklustre start to the year. Housebuilding once again continues to storm ahead in the industry, as housebuilders continue to try to keep pace with the demand and appetite for new housing.”

“With both the commercial & retail and infrastructure sectors increasing their levels of activity in March, it would be good to see this continue and take some of the pressure away from private housing, which has been the only sector that has continually grown and at times propped up the industry in recent years.”

“With the EU referendum looming, this will be interesting to follow over the coming months to see what affect it will have across the construction sector as there is anecdotal evidence to suggest this is starting to make an impact on investment decisions inside the boardrooms of construction firms.”

New construction activity has fallen back into contraction, according to figures released today by industry analysts Glenigan.

The value of new projects starting on site was 4% lower than a year earlier during the three months to November. Housing, non-residential and civil engineering starts were all scarcer during the period compared to this time last year.

The amount of new commercial and industrial work was flat on a year earlier during the latest period. Growth in the industrial and hotel and leisure sectors offset falling starts of both office and retail schemes.

Commenting on this month’s figures, Allan Wilén, Glenigan’s Economics Director, said: “The latest evidence on commercial construction starts is disappointing given the continued strength of the economic backdrop.”

“However the forward pipeline is much more positive. In the office sector, for example, the value of work achieving planning approval has risen by more than 50% during the last three months.”

Less surprisingly, the public sector is continuing to hold back growth. The value of the health sector is forecast to fall by a quarter during the course of 2015 alone: during the latest three months starts were almost 50% down on a year earlier. The education sector is also in decline. Despite schools funding overall being ring-fenced, government capital programmes do not seem to be making a huge impact on the ground.

Private housing activity grew modestly, up 2% on a year ago. This rise was more than offset by the drag from the social housing sector, where starts were 9% down on a year ago. The sector is bracing itself for three years of reductions in rents. Plans for increased support of housebuilding have been aimed squarely at increasing home ownership, bringing little relief for the rented accommodation model championed by Housing Associations.

According to Mr Wilén: “The Chancellor’s Autumn Statement pledges on housing appear to be a further boon to the private housing sector. In the short term, activity may undergo a pause as developers assess how best to reap the potential rewards.”

The civil engineering sector also saw an 8% annual decline in starts, as growth in utilities work was unable to offset contracting infrastructure starts.

Most parts of the UK have been dragged backwards by weakening commercial and public sector construction. Northern England and the Midlands have led growth through 2015. However only West Midlands and the North East have stayed in the black; the North West, Yorkshire and the Humber and the East Midlands have all moved into decline in the latest figures.

London and the South East, by contrast, have returned to growth after being hit especially hard by an election hiatus and the slowing in the housing market earlier this year.

No such change in fortunes for the UK’s other constituent nations: Scotland, Wales and Northern Ireland have all failed to record growth since March 2015.

The North West residential sector saw a significant boost in the number of new build properties commissioned in Q3 this year, leading all regions with 5,275 units.

According to the latest Market Insight report from construction data experts Barbour ABI, £621 million pounds worth of property development was commissioned in Q3, with £608 million from the private sector. This is a significant figure that will likely provide a boost in confidence across the industry and region, as investors are giving the go-ahead to a significant amount of residential projects.

Greater Manchester had the leading amount of residential investment in Q3 within the North West, with major projects commissioned including two city centre £40 million projects, the New Union Street and Axis Tower developments, constructing 302 & 172 apartments respectively.

Six of the top ten largest residential projects commissioned in the region in Q3 were private developments for flats, which has been a major area of residential growth within the region.

Commenting on the figures, Michael Dall, Lead Economist at Barbour ABI, said “With a lack of housing across the North West heavily publicised, it’s welcoming news that the region leads the UK for new build units in Q3.”

“With the mismatch between housing supply and demand, property prices have continued to rise at a significant pace in the region. Home movers, investors and housebuilders will welcome the news, as major residential investment has been poured into the North West in the last quarter, which will hopefully help to alleviate the housing shortage.”

“If there’s one concern coming from these latest figures it is from a social housing perspective. Only ten of the 87 projects came from the public sector in Q3, however it’s likely that affordable housing will be provided within many of the up-coming private residential developments.”

News that we are experiencing strong growth in constructing has been brought into disrepute by new figures released by the Office for National Statistics (ONS).

The Markit/Cips Purchasing Managers’ Index for construction that was released last month clearly indicated a reassuring reading of 58.8; 50 being the point which separates expansion from contraction. Whilst down from 59.9 recorded in the previous month, the report still highlighted strong growth in construction, an industry that is accountable for around 6% of the UK’s GDP.

However, the latest GDP estimate made by the Office for National Statistics revealed quite the opposite to that being reported by Market/Cips, suggesting that construction output actually reduced by 2.2% in the three months to September.

So which report is right!?

Chief UK and European Economist for IHS Global Insight, Howard Archer commented the clear contradictions between the reports raised “considerable doubts” about the overall accuracy of the official construction data given by the ONS. He pointed out that other data compiled by Bank of England regional agents on construction also pointed towards growth within the sector, rather than reduction.

Vice President and Senior Economist of Markit, Tim Moore reaffirmed their own results, saying “The sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn.”

The ONS had been due to release a report comparing their own figures and those of Markit on 11 September, but this had to be cancelled for “operational reasons”.

Mark Robinson, the chief executive of the Scape Group warns that regardless of whether the industry has experienced growth or not this year, something must be done to attract new talent into construction if we are to sustain a healthy and vibrant industry long-term. He said “Much of the skilled workforce is due to retire in the next five to 10 years and if we can’t train enough new talent to replace them, the construction industry will struggle to deliver the new homes and infrastructure that both the community and the economy badly needs.”

The latest ONS figures, released this week, highlighted a decline in construction activity during Q3. Output in the construction industry was 2.2% lower than in Q2 and 0.1% lower than a year ago, and was 4.3% lower than the pre-recession peak.

Dr Noble Francis, Economics Director at the Construction Products Association, put the data into context: “The fall in construction output in Q3, compared to a year ago, was the first annual fall since 2013 Q1. Skills shortages have been a key issue recently in the industry and are hindering growth, especially in house building. Where skilled labour is available, wage inflation has also been a serious issue, hindering the viability of many sites.

“In the private commercial sector, the largest construction sector, there are still many projects in the pipeline due to contracts that were signed 18-24 months ago. However, sharp rises in costs since then, due to a lack of skilled labour, have adversely affected margins and meant that many projects are on hold for the moment whilst contractors go back to clients and renegotiate prices.”

“Overall, recovery is never a straight line and there are always a few bumps and scrapes along the way. Projects in the pipeline across most construction sectors suggest that activity in the industry will rise in 2016 and our forecasts anticipate 4.2% growth in total construction next year, driven by recovery in house building, commercial and infrastructure activity. Skills shortages, however, are proving to be a key issue constraining growth for the industry.”

The total value for commercial & retail construction contracts in August were worth more than £1.5 billion, the highest in over four years, based on a three month rolling average.

According to the latest Economic & Construction Market Review from Barbour ABI, it was a busy August for the commercial & retail sector but in particular office construction, which dominated the sector for the month with 84 per cent of the total value of contracts awarded.

To put the growth of commercial & retail contract values into perspective, the last three months have each had more than double the value when compared to that in May. August also experienced an increase of more than 70 per cent when compared to the same month last year.

London led all regions with over 60 per cent of the total amount of commercial & retail contract values in August, including eight of the top ten biggest projects. Contracts for major office developments were finalised including the £150m Park Place development in Canary Wharf and the £100m Marble Arch project in Westminster.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said “After an unstable start to the year, commercial & retail construction has picked up dramatically to the point where August has been the strongest month for more than four years.”

“It’s not surprising to see London dominating the sector once again. As a global city, we’re seeing more and more demand for office space in the capital, hence the massive projects awarded contracts this month. Even with the recent spike in office construction work being put on hold, this isn’t putting off investors rolling the dice with new projects looking towards the future and the potential gains to be made from London property.”

“Over the last three months and in particular August, demonstrates that there is a major demand for office space and willingness from investors to spend and commit to new projects. The long term growth for this sector is looking positive, and when commercial & retail is strong it can often be a sign that the economy as a whole is performing well.”