Project starts dip on referendum uncertainty
• Starts in the three months to May were 5% down on a year ago.
• Residential starts up sharply on the preceding three months, but have failed to match last year’s levels
• Higher office project starts have helped offset a weakening in public sector non-residential projects
• Reversal in civil engineering projects dampened overall starts
The value of work starting on site* in the three months to May was 5% down on the same period of a year ago, according to the latest Glenigan Index. The decline was largely due to a sharp drop in project starts during May against a year ago.
Commenting on this month’s figures, Allan Wilén, Glenigan’s Economics Director, said: “The drop in project starts during May is disappointing, even though it had been anticipated. There was a sharp decline in private sector starts during May which dragged down the three month total and suggests that developers are now delaying their commitment to new projects until after the EU referendum. This, combined with a fall in civil engineering project and a continued weakening in public sector starts, contributed to the overall decline in the index.
“However in contrast to the current weakening in project starts, the development pipeline remains firm. Overall the value of projects securing detailed planning approval during the first five months of 2016 is 7% up on a year ago. Furthermore the strongest growth has been in areas such as private housing and office developments which have increased 23% and 13% respectively. Whilst investor nervousness is likely to dampen project starts near term, we anticipate that there will be a rise in projects going out to tender over the coming months as clients’ line up work to start on site.
“Accordingly, the second half of 2016 could see a sharp rise in activity as private investors press ahead with projects once the issue of EU membership has been resolved.”
The regional pattern of project starts has been mixed. The North East, North West, West Midlands and Scotland all saw starts slip back after the positive performance recorded in the previous survey. Project stats in the East of England, South West and Yorkshire & the Humber were up on a year earlier, while starts in the capital were virtually unchanged.
Glenigan Indices (underlying* projects up to £100 million)
|
|
Glenigan Index |
Residential |
Non-residential |
Civil engineering |
||||
|---|---|---|---|---|---|---|---|---|
|
|
Index |
% Change |
Index |
% Change |
Index |
% Change |
Index |
% Change |
|
May-15 |
99.8 |
-11% |
109 |
1% |
89 |
-13% |
119 |
-29% |
|
Jun-15 |
97.5 |
-17% |
98 |
-15% |
94 |
-14% |
112 |
-30% |
|
Jul-15 |
102.9 |
-15% |
103 |
-17% |
104 |
-5% |
97 |
-41% |
|
Aug-15 |
115.1 |
-8% |
121 |
-2% |
113 |
-6% |
107 |
-29% |
|
Sep-15 |
123.5 |
2% |
136 |
18% |
115 |
-6% |
122 |
-11% |
|
Oct-15 |
130.5 |
15% |
144 |
34% |
121 |
5% |
130 |
5% |
|
Nov-15 |
127.1 |
17% |
133 |
20% |
125 |
19% |
119 |
0% |
|
Dec-15 |
101.9 |
3% |
108 |
1% |
100 |
13% |
91 |
-19% |
|
Jan-16 |
102.1 |
-12% |
111 |
-15% |
98 |
-1% |
94 |
-37% |
|
Feb-16 |
104.4 |
-9% |
121 |
-3% |
88 |
-12% |
122 |
-19% |
|
Mar-16 |
132.2 |
7% |
152 |
12% |
114 |
7% |
148 |
-8% |
|
Apr-16 |
119.2 |
17% |
135 |
23% |
103 |
15% |
138 |
6% |
|
May-16 |
94.9 |
-5% |
102 |
-6% |
88 |
-1% |
100 |
-15% |
Note: *, underlying projects are valued over £250,000 and under £100 million
r – Revised, p – Provisional. Percentage change is against the same period of previous year.
Source: Glenigan
*Note on the statistics
The Glenigan Index of project starts provides a leading indicator of construction activity in the UK. It is based on data collected about every construction project which started on site during the previous three-month period. The Index covers civil engineering, office and commercial projects over £250,000 and more than 10 units for residential property. It excludes any project over £100 million.