Government Funding Filters Through To Construction Starts

A strong performance in the public and utilities sectors has helped steady the flow of construction work, according to the July Glenigan Index.

The Index, which tracks the underlying value of construction projects starting on site, recorded a 16% year on year decline in July, a further improvement against the sharp declines of up to a third seen earlier in the year. Educational, social housing and utilities projects all saw positive signs leading up to July. This has partially offset the impact of private sector starts which remain extremely weak. Glenigan anticipates that project starts across the industry will stabilise further over the remaining months of 2009, albeit at low levels.

Overall the fall in private sector schemes continues to depress construction starts nationwide: the North East, West Midlands and South England regions suffered sharp falls in construction work. Only Scotland, Northern Ireland and Yorkshire & the Humber enjoyed a rise in project starts in the three months to July, thanks to increases in public sector and civil engineering schemes.


Whilst there have been recent signs of improvement in the housing market, developers remain focussed on completing and securing sales on existing projects. As a result, private housing starts remain weak, although off recent lows. The value of commercial and industrial projects starts remain extremely weak following a slew of schemes being put on hold. However, public sector work, and in particular a rise in education projects, has helped soften the decline in the Non-residential Index to 21%.

Allan Wilén, Economics Director at Glenigan, cautioned: "The fall in new project starts is forecast to moderate over the coming months as the initial impact of the credit crunch eases. However, with the UK economy in recession the flow of private sector projects in particular will remain weak.

"Furthermore, the encouraging pick-up in public sector starts in recent months may lose momentum during the second half of 2009. In particular, based on analysis of projects being tracked by Glenigan we now expect the flow of education and health projects schemes to slow during the remainder of the year. Accordingly, while the Glenigan Index should gradually move away from recent lows, the value of underlying project starts will be weak for some time."

(CD/KMcA)